Homework problems

The effects of purchasing inventory on credit are to: increase assets and increase liabilities. increase assets and increase stockholders' equity. decrease assets and decrease stockholders' equity. decrease assets and decrease liabilities.

increase assets and increase liabilities.

At December 31, Marker reported the following items: cash, $7,500; inventory, $3,900; accounts payable, $5,900; accounts receivable, $3,100; common stock, $6,000; property, plant, and equipment, $10,500; interest payable, $1,600; retained earnings, $11,500. Refer to the information for Marker above. What is the total of Marker's current assets? -$12,100 -$13,700 -$14,500 -$25,000

$14,500(cash, inventory, accounts receivable)

The following information for Kellman Inc. is available at the end of 2019. Calculate the amount of dividends reported on the retained earnings statement for 2019. Total assets on 12/31/2018 $82,400 Common stock on 12/31/2018 $50,000 Total assets on 12/31/2019 88,500 Common stock on 12/31/2019 50,000 Total liabilities on 12/31/2018 9,200 Net income for 2019 19,500 Total liabilities on 12/31/2019 11,300

$15,500

At December 31, Marker reported the following items: cash, $7,500; inventory, $3,900; accounts payable, $5,900; accounts receivable, $3,100; common stock, $6,000; property, plant, and equipment, $10,500; interest payable, $1,600; retained earnings, $11,500. Refer to the information for Marker above. What is Marker's stockholders' equity? -$7,500 -$17,500 -$19,100 -$25,000

$17,500(common stock, retained earnings)

In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of $4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for $600 but does not pay this bill until 2020. For December 2019, under the accrual basis of accounting, Swanstrom would recognize: -$8,000 of revenue and $600 of expense. -$8,000 of revenue and $0 of expense. -$3,500 of revenue and $600 of expense. -$3,500 of revenue and $0 of expense.

$3,500 of revenue and $600 of expense.

At December 31, Pitt Inc. has assets of $12,900 and liabilities of $6,300. What is the stockholders' equity for Pitt at December 31? -$6,600 -$6,300 -$18,100 -$19,200

$6,600

Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel. Calculate the amount of expense recognized in May under (1) cash-basis accounting and (2) accrual-basis accounting.

(1) Cash-basis accounting Fuel expense paid in May-> $95,450 Supply build paid in May-> $15,000 Total-> $110,450 (2)accrual-basis accounting Total may fuel expense-> $132,600 Note: The $15,000 paid to the other supplier in May to build up the fuel supply is not an accrual-basis expense in May. Instead, it is a prepaid item that will be expensed when the fuel is used.

The following information describes transactions for Morgenstern Advertising Company during July: - On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies. - Morgenstern paid $9,600 to salespeople for salaries earned during July. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month. - Paid $2,950 to the local utility company for electric service. Electric service in July was $2,300 of the $2,950 total bill. Calculate the amount of expense recognized in July under (1) cash-basis accounting and (2) accrual-basis accounting.

(1) Cash-basis accounting supplies-> $20,500 Salespeople-> $9,600 Utilities-> $2,950 Total-> $33,050 (2) Accrual-basis accounting Supplies -> $18,450 Salespeople->$11,210 Utilities-> $2,300 Total->$31,960

McDonald Music sells used CDs for $4.00 each. During the month of April, McDonald sold 7,650 CDs for cash and 13,220 CDs on credit. McDonald's cash collections in April included $30,600 for the CDs sold for cash, $12,800 for CDs sold on credit during the previous month, and $29,850 for CDs sold on credit during April. Calculate the amount of revenue recognized in April under (1) cash-basis accounting and (2) accrual-basis accounting.

(1) Cash-basis revenue: Cash collected in April from April cash sales* -> $30,600 Cash collected in April from March credit sales -> $12,800 Cash collected in April from April credit sales -> $29,850 Total cash basis revenue -> $73,250 (2) Accrual-basis revenue: April cash sales* -> $30,600 April credit sales** -> $52,880 Total accrual-basis revenue -> $83,480 *7,650 units x $4.00 = $30,600 **13,220 units x $4.00 = $52,880

The following information is taken from the accrual accounting records of Kroger Sales Company: a. During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next 2 months (February and March). The supplies will be used evenly over the next 2 months. b. Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively. c. Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April. (1) Under cash-basis accounting, how much expense should Kroger report for February and March? (2)Under accrual-basis accounting, how much expense should Kroger report for February and March? (3)CONCEPTUAL CONNECTION Which basis of accounting provides the most useful information for decision-makers? Why?

(1) February-> $4925 March-> $5100 Total->$10,025 (2)February-> $9500 March-> $10525 Total->$20,025 (3) The Accrual Basis of Accounting provides more useful information for decision makers because it recognizes revenues when earned and expenses when incurred.

At the beginning of the year, Morgan Company had total assets of $425,000 and total liabilities of $260,000. Use the fundamental accounting equation to answer the following independent questions: (a)What is total stockholders' equity at the beginning of the year? (b)If, during the year, total assets increased by $73,000 and total liabilities increased by $32,000, what is the amount of total stockholders' equity at the end of the year? (c)If, during the year, total assets decreased by $52,000 and total stockholders' equity increased by $35,000, what is the amount of total liabilities at the end of the year? (d)If, during the year, total liabilities increased by $85,000 and total stockholders' equity decreased by $73,000, what is the amount of total assets at the end of the year?

(a) $165,000 (b) $206,000 (c) $173,000 (d)$437,000

Decision-makers use accounting information in a wide variety of decisions, including the following: (a)Deciding whether or not to lend money to a business (b)Deciding whether or not an individual has paid enough in taxes (c)Deciding whether or not to place merchandise on sale in order to reduce inventory (d)Deciding whether or not to invest in a business (e)Deciding whether or not to demand additional benefits for employees Match each decision with one of the following decision-makers who is primarily responsible for the decision: a government (G), an investor (I), a labor union (U), business managers (M), or a bank (B).

(a) B (b) G (c) M (d) I (e) U

Listed below are items that would appear on a statement of cash flows. (a)Cash received from customers (b)Cash paid for dividends (c)Cash received from a bank loan (d)Cash paid to suppliers (e)Cash paid to purchase equipment Indicate in which part of the statement of cash flows each of the items would appear: operating activities (O), investing activities (I), or financing activities (F).

(a) O (b) F (c) F (d) O (e) I

Each of the following situations relates to the recognition of revenue: (a). A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January. (b). A furniture store sells and delivers furniture to a customer in June with no payments and no interest for 6 months. (c). An airline sells an airline ticket and collects the fare in February for a flight in March to a spring break destination. (d). A theme park sells a season pass and collects the cash in January which allows entrance into the park for an entire year. (e). A package delivery service delivers a package in October but doesn't bill the customer and receive payment until November. CONCEPTUAL CONNECTION For each situation, indicate when the company should recognize revenue on an accrual basis.

(a). December (b). June (c). March (d). Split throughout the year (e). October

Several events are listed below. (a)Common stock is issued to investors. (b)An agreement is signed with a janitorial service to provide cleaning services over the next 12 months. (c)Inventory is purchased. (d)Inventory is sold to customers. (e)Two investors sell their common stock to another investor. (f)A 2-year insurance policy is purchased. -For each of the events, identify which ones qualify for recognition in the financial statements. -For events that do not qualify for recognition, explain your reasoning.

(a)Common stock is issued to investors-Qualified (b)An agreement is signed with a janitorial service to provide cleaning services over the next 12 months-Disqualified. No economic inflow or outflow has resulted from this event. (c)Inventory is purchased- Qualified (d)Inventory is sold to customers-Qualified (e)Two investors sell their common stock to another investor-Qualified (f)A 2-year insurance policy is purchased-Qualified

The following are several transactions for Halpin Advertising Company. -Purchased $1,000 of supplies. -Sold $5,000 of advertising services, on account, to customers. -Used $250 of supplies. -Collected $3,000 from customers in payment of their accounts. -Purchased equipment for $10,000 cash. -Recorded $500 depreciation on the equipment for the current period. Identify the effect, if any, that each of the above transactions would have on net income under cash-basis accounting and accrual-basis accounting.

-Purchased $1,000 of supplies. -Sold $5,000 of advertising services, on account, to customers. -Used $250 of supplies. -Collected $3,000 from customers in payment of their accounts. -Purchased equipment for $10,000 cash. -Recorded $500 depreciation on the equipment for the current period.

An analysis of the transactions of Canary Cola Inc. yields the following information: service revenue, $78,000; supplies expense, $33,200; rent expense, $20,500; and dividends, $7,000. -What is the amount of net income reported by Canary Cola?

-Revenue-> $78,000 -Expenses-> 52,500 -Net income-> $24,300

Softball Magazine Company received advance payments of $75,000 from customers during 2019. At December 31, 2019, $20,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2019, calculate what the balances will be in the Unearned Magazine Revenue and Magazine Revenue accounts.

-Unearned revenue- $20,000 -Revenue- $55,000

Dunn Sporting Goods sells athletic clothing and footwear to retail customers. Dunn's accountant indicates that the firm's operating cycle averages 6 months. At December 31, 2019, Dunn has the following assets and liabilities: (a)Prepaid rent in the amount of $8,500. Dunn's rent is $500 per month. (b)A $9,700 account payable due in 45 days. (c)Inventory in the amount of $46,230. Dunn expects to sell $38,000 of the inventory within 3 months. The remainder will be placed in storage until September 2020. The items placed in storage should be sold by November 2020. (d)An investment in marketable securities in the amount of $1,900. Dunn expects to sell $700 of the marketable securities in 6 months. The remainder are not expected to be sold until 2022. (e)Cash in the amount of $1,050. (f)An equipment loan in the amount of $60,000 due in March 2024. Interest of $4,500 is due in March 2020 ($3,750 of the interest relates to 2019, with the remainder relating to the first 3 months of 2020). (g)An account receivable from a local university in the amount of $2,850. The university has promised to pay the full amount in 3 months. (h)Store equipment at a cost of $9,200. Accumulated depreciation has been recorded on the store equipment in the amount of $1,250. -Prepare the current asset and current liability portions of Dunn's December 31, 2019, balance sheet. -Compute Dunn's working capital and current ratio at December 31, 2019. -As in investor or creditor, what do these ratios tell you about Dunn's liquidity?

-Working Capital (current assets-current Liabilities) $56830-$13450=$43,380 -Current ratio (current assets/current liabilites) $56830/$13450= 4.32 - These ratios give users insights into a company's liquidity. Taht is a company's ability to pay obligations as the become due. These ratios show that dunn sporting goods has adequate current assets to cover all of the current liabilites that will be due in the near future

Orlando Inc. reported the following information: Furniture- $46,000-12/31/19 $32,000/12/3/18 Accumulated depreciation 15,900-12/31/19 12,50012/31/18 Investment (long-term) 38,000-12/31/19 50,000-12/31/18 In addition, Orlando sold furniture costing $8,000 with accumulated depreciation of $5,000 for $3,500. Orlando also reported a $3,000 gain on the sale of long-term investments. Compute net cash flow from investing activities.

-proceeds from sale of furniture-> $8180 -Proceeds from sale of investment-> (50000-38000)+1600=13600 -Purchase of furniture-> (32000-14100)-46000)= -$28100 -Net cash flow from investing-> -$6320

Carrico Advertising Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico's activities during 2019. (a). At the beginning of 2019, customers owed Carrico $45,800 for advertising services performed during 2018. During 2019, Carrico performed an additional $695,100 of advertising services on account. Carrico collected $708,700 cash from customers during 2019. (b). At the beginning of 2019, Carrico had $13,350 of supplies on hand for which it owed suppliers $8,150. During 2019, Carrico purchased an additional $14,600 of supplies on account. Carrico also paid $19,300 cash owed to suppliers for goods previously purchased on credit. Carrico had $2,230 of supplies on hand at the end of 2019. (c). Carrico's 2019 operating and interest expenses were $437,600 and $133,400, respectively. 1. Calculate Carrico's 2019 income before taxes. 2. Calculate the ending balance of accounts receivable, the supplies used, and the ending balance of accounts payable. 3. CONCEPTUAL CONNECTION Explain the underlying principles behind why the three accounts computed in Requirement 2 exist.

1. $124,100 2. ending balance of accounts receivable-> $32,200 Supplies used-> $25,720 accounts payable-> $3,450 3. The underlying principle on which the 3 accounts of accounts payable, accounts receivables and supplies consumed accounts exist is the accrual principle. Under its principle, the expenses are recorded when they are incurred, irrespective of the payment date.

Alan Spalding is CEO of a large appliance wholesaler. Alan is under pressure from Wall Street Analysts to meet his aggressive sales revenue growth projections. Unfortunately, near the end of the year he realizes that sales must dramatically improve if his projections are going to be met. To accomplish this objective, he orders his sales force to contact their largest customers and offer them price discounts if they buy by the end of the year. Alan also offered to deliver the merchandise to a third-party warehouse with whom the customers could arrange delivery when the merchandise was needed. 1. Do you believe that revenue from these sales should be recognized in the current year? Why or why not? 2. What are the probable consequences of this behavior for the company in future periods? 3. What are the probable consequences of this behavior for investors analyzing the current year financial statements?

1. If the only thing that had been done was offering price discounts to induce customers to buy, then it would be revenue. However, the delivery to a third-party warehouse raises concerns. The primary question that must be answered is who has the risks and benefits of ownership of the inventory in the third-party warehouse. For example, if the inventory is stolen or damaged, who is responsible for the loss? If Mr. Spalding's company is responsible, then it should not be counted as revenue. If the buyers are responsible for such loss, then it can be counted as revenue. 2. This behavior did not increase sales activity; it merely moved some sales from the next period into this period. As such, we would expect sales in the next period to be lower than if the price discounts had not been offered. Plus, common sense would suggest that if the price discounts were significant enough for the buyers to be willing to overstock, then the company probably traded much higher margin sales in the next period for much lower margin sales in this period. 3. Analysts may notice lower gross margins in the current period (compared to the previous period) due to the price discounts. If they look at quarterly filings (10-Q), they may also notice lower than anticipated sales in the first three quarters followed by unusually high sales in the fourth quarter. Analysts should be very suspicious any time this happens.

Stanfield Inc. reported the following items in its statement of cash flows presented using the indirect method. 1. Decrease in inventory 2. Paid a cash dividend to stockholders 3. Purchased equipment for cash 4. Issued long-term debt 5. Depreciation expense 6. Sold a building for cash Indicate whether each item should be classified as a cash flow from operating activities, a cash flow from investing activities, or a cash flow from financing activities.

1. Operating 2. financing 3. investing 4. financing 5. Operating 6. investing

Walters Inc. began operations on January 1, 2019. The following information relates to Walters' cash flows during 2019. 1. Calculate the cash provided/used for each cash flow category. 2. Comment on Walters' creditworthiness.

1. See image 2. Walters has positive cash flow, especially from operations, showing the company is in a good financial position to pay its debts as the come due. the negative cash flow in investing is a sign of a growing company that is investing in revenue-producing assets. In, addition, from the large amount of cash received from financing activities, it appears that Walters is able to raise large amounts of capital to finance its operations.

Jerrison Company operates a wholesale hardware business. The following balance sheet accounts and balances are available for Jerrison at December 31, 2019. 1. Prepare a classified balance sheet for Jerrison at December 31, 2019. 2. Compute Jerrison's working capital and current ratio at December 31, 2019. 3. If Jerrison's management is concerned that a large portion of its inventory is obsolete and cannot be sold, how will Jerrison's liquidity be affected?

1. See image 2. Working capital of $57,800. Current ratio of 1.22 3. While Jerrison appears to be liquid, inventory is its largets current asset at $187900. If a large portion of inventory cannot be sold, Jerrison will most likely not generate sufficient cash flow to pay its obligations as they become due

Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com. 1. How much cash and equivalents and short-term investments (or current marketable securities) did Columbia and Under Armour hold as a percentage of total assets at the end of 2015 and 2016? (Hint: It may help to do a search for "equivalents" in a word or pdf version of the 10-K.) 2. Speculate as to differences in cash management policies between the two companies. 3. Describe the change in cash and equivalents and marketable securities as a percentage of total assets for Under Armour between 2015 and 2016. 4. Locate the Auditor's Opinion on the effectiveness of internal controls over financial reporting and describe the steps the auditors took to audit the effectiveness of Under Armour's and Columbia's internal controls over financial reporting.

1. See picture 2. Differences in cash management policies between the companies could be numerous. However, It appears as if columbia attempts to maintain a much higher portion of total assets in cash and equivalents 3. Under Armour has a significantly higher portion of its total assets in cash and equivalents at the end of 2016. This increase could represent a strategic decision on the part of management, but more likely signals a temporary cash surplus in 2016 or cash deficit in 2015. Students weren't asked to do this, but looking at Under Armour's balances in pervious years indicates a higher percentage of total assets being help as cash and equivalents. This suggests that a cash deficit may have existed in 2015 4. According to the audit opinions, Under Armour's and Columbia's internal control systems were evaluated based on the criteria of obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The audits of internal control also include performing such other procedures considered necessary in certain circumstances

Four transactions are listed below. (a)Sold goods to customers on credit. (b)Collected amounts due from customers. (c)Purchased supplies on account. (d)Used supplies in operations of the business. Prepare three columns labeled assets, liabilities, and stockholders' equity. For each of the transactions, indicate whether the transaction increased (+), decreased (−), or had no effect (NE) on assets, liabilities, or stockholders' equity.

1. assets - Sold goods to customers on credit. (NE) -Collected amounts due from customers. (NE) -Purchased supplies on account.(+) -Used supplies in operations of the business.(-) 2. liabilities - Sold goods to customers on credit. (NE) -Collected amounts due from customers. (NE) -Purchased supplies on account.(+) -Used supplies in operations of the business.(NE) 3. stockholders equity - Sold goods to customers on credit. (NE) -Collected amounts due from customers. (NE) -Purchased supplies on account.(NE) -Used supplies in operations of the business.(-)

Hart Inc. began the year with $315,700 of accounts receivable. During the year, Hart sold a considerable amount of merchandise on credit and collected $2,427,000 of its credit sales. At the end of the year, the accounts receivable balance is $16,800 lower than the beginning balance. Calculate the amount of credit sales during the period.

298900+427000-315700=2410200

Beginning accounts receivable were $275,500, and ending accounts receivable were $302,300. Cash amounting to $2,965,000 was collected from customers' credit sales. Calculate the amount of sales on account during the period.

302300+2965000-275500=2991800

The office manager for Stony Company had accumulated the following information at the end of a recent year: -Accounts receivable $22,470 -Change for cash registers (currency and coin) 4,800 -Amount on deposit in checking account (bank balance) 7,382 -Amount on deposit in savings account (bank balance) 30,000 -Balance in petty cash 500 -Checks received from customers, but not yet deposited in bank 590 -Checks sent by Stony to suppliers, but not yet presented at bank for payment 560 -Deposits in transit 920 -IOU from Richard Sandy, company president 10,000 -Notes receivable 13,400 -NSF check written by Liam Company 430 -Prepaid postage 125

4,800+7382+30000+500+590+920-560=$43,632

Beginning accounts receivable were $43,375. All sales were on account and totaled $187,600. Cash collected from customers totaled $182,450. Calculate the ending accounts receivable balance

43375+187600-182450= $48525

Diviney Corporation's net sales and average net trade accounts receivable were $8,750,000 and $630,000, respectively. Calculate Diviney's accounts receivable turnover.

9750000/630000=13.89

Food To Go is a local catering service. Conceptually, when should Food To Go recognize revenue from its catering service? a. At the date the meals are served b. At the date the invoice is mailed to the customer c. At the date the customer places the order d. At the date the customer's payment is received

A

On August 31, 2019, Montana Corporation signed a 4-year contract to provide services for Minefield Company at $30,000 per year. Minefield will pay for each year of services on the first day of each service year, starting with September 1, 2019. Using the accrual basis of accounting, when should Montana recognize revenue? a. On the first day of each year when the cash is received b. Equally throughout the year as services are provided c. On the last day of each year after the services have been provided d. Only at the end of the entire contract

B

What does the phrase, "Revenue is recognized at the point of sale" mean? a. Revenue is recorded in the accounting records when the cash is received from a customer and reported on the income statement when sold to the customer. b. Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to the customer. c. Revenue is recorded in the accounting records when the goods are sold to a customer and reported on the income statement when the cash payment is received from the customer. d. Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.

B

Richter Industries has the following items: -Currency=$27,500 -Customer checks that have not been deposited=850 -U.S. government bonds that originally maturing in 3 months=11,000 -U.S. government bonds that originally maturing in 12 months=14,000 -Cash in saving and checking accounts=50,000 -Certificates of deposits that originally maturing in 18 months=47,000 How much should Richter report as cash and equivalents on its balance sheet?

Currency+Customer checks that have not been deposited+U.S. government bonds that originally maturing in 3 months+Cash in saving and checking accounts= $89, 350

When is revenue from the sale of merchandise normally recognized? a. When the customer takes possession of the merchandise, if sold for cash, or when payment is received, if sold on credit b. When the customer pays for the merchandise c. Either on the date the customer takes possession of the merchandise or the date on which the customer pays d. When the customer takes possession of the merchandise

D

Omega Transportation Inc., headquartered in Atlanta, Georgia, uses accrual-basis accounting and engaged in the following transactions: -billed customers $3,580,000 for transportation services -collected cash from customers in the amount of $2,479,000 -purchased fuel supplies for $1,655,000 cash -used fuel supplies that cost $1,598,240 -employees earned salaries of $425,160 -paid employees $413,380 cash for salaries Determine the amount of sales revenue and total expenses for Omega's income statement.

Revenue-> $3,580,000 Expenses-> $2,023,320

Volume Electronics sold a television to Sarah Merrifield on December 15, 2019. Sarah paid $100 at the time of the purchase and agreed to pay $100 each month for 5 months beginning January 15, 2020. Determine in what month or months revenue from this sale should be recorded by Volume Electronics to ensure proper application of accrual accounting.

Sales revenue should be recorded in December because that is when the performance obligation was satisfied

Burns Company's 2019 and 2018 balance sheets presented the following data for equipment: During 2019, equipment costing $41,000 with accumulated depreciation of $36,700 was sold for cash, producing a $3,200 gain. 1.Calculate the amount of depreciation expense for 2019. 2.Calculate the amount of cash spent for equipment during 2019. 3. Calculate the amount that should be included as a cash inflow from the disposal of equipment.

See image

The following events occurred for Parker Company. a. Performed consulting services for a client in exchange for $3,200 cash. b. Performed consulting services for a client on account, $1,700. c. Paid $30,000 cash for land. d. Purchased office supplies on account, $900. e. Paid a $2,500 cash dividend to stockholders. f. Paid $550 on account for supplies purchased in Transaction d. g. Paid $800 cash for the current month's rent. h. Collected $1,500 from client in Transaction b. i. Stockholders invested $20,000 cash in the business. -Analyze the effect of each transaction on the accounting equation. For example, if salaries of $500 were paid, the answer would be "Decrease in stockholders' equity (expense) $500 and decrease in assets (cash) $500." -For Event d, what accounting principle did you use to determine the amount to be recorded for supplies?

See image a. Performed consulting services for a client in exchange for $3,200 cash b. Performed consulting services for a client on account, $1,700. c. Paid $30,000 cash for land. d. Purchased office supplies on account, $900. e. Paid a $2,500 cash dividend to stockholders. f. Paid $550 on account for supplies purchased in Transaction d. g. Paid $800 cash for the current month's rent. h. Collected $1,500 from client in Transaction b. i. Stockholders invested $20,000 cash in the business. -The payment for supplies is made at the time of purchase. The purchases supplies are consumed after the supplies are purchased. This indicates that payment is made before the expense is incurred. The entity uses the purchased supplies during the accounting period. Therefore, the asset balance will not match with the actual supplies in hand.

An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31, 2019: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, $3,800. -Prepare a balance sheet for Cavernous Homes Inc. at December 31, 2019.

See picture

Morgan Inc. entered into the following transactions: (a)Issued common stock to investors in exchange for $30,000 cash. (b)Borrowed $10,000 cash from First State Bank. (c)Purchased $3,000 of supplies on credit. (d)Paid for the purchase in Transaction c. Show the effect of each transaction using the following model. Assets=Liabilities+Stockholders' Equity Contributed Capital+ Retained Earnings

See picture

The Mendholm Company entered into the following transactions: (a)Performed services on account, $21,500. (b)Collected $9,500 from client related to services performed in Item a. (c)Paid $500 dividend to stockholders. (d)Paid salaries of $4,000 for the current month.

See picture

Taylor Company recently purchased a piece of equipment for $2,000 which will be paid within 30 days after delivery. At what point would the event be recorded in Taylor's accounting system? -When Taylor signs the agreement with the seller -When Taylor receives an invoice (a bill) from the seller -When Taylor receives the asset from the seller -When Taylor pays $2,000 cash to the seller

When Taylor receives the asset from the seller

Each of the following balance sheet changes is associated with a particular transaction: a. Cash decreases by $22,000 and land increases by $22,000. b. Cash decreases by $9,000 and retained earnings decreases by $9,000. c. Cash increases by $100,000 and common stock increases by $100,000. d. Cash increases by $15,000 and notes payable increases by $15,000. Describe each transaction listed above.

a. Purchase of land for $22,000 b. Dividend payed for $9,000 c. Issued common stock for cash $100,000 d. Loan form bank $15,000

Hebert Company reported the following information for 2019: a. Repaid long-term debt->$75,000 b. Paid interest on note payable ->1,570 c. Issued common stock-> 30,000 d. Paid dividends->18,000 Compute net cash flow from financing activities.

a. cash outflow b. N/A c. cash inflow d. cash outflow Net cash flow: -$63,000

A review of the balance sheet of Peterson Inc. revealed the following changes in the account balances: a. Increase in long-term investment b. Increase in accounts receivable c. Increase in common stock d. Increase in long-term debt e. Decrease in accounts payable f. Decrease in supplies inventory g. Increase in prepaid insurance h. Decrease in retained earnings Indicate whether each of the changes above produces a cash increase, a cash decrease, or is a noncash activity.

a. decrease b. decrease c. Increase d. increase e. decrease f. increase g. decrease h. decrease

Foster Company reported the following items in its statement of cash flows presented using the indirect method. a. Interest paid on long-term note payable b. Proceeds from sale of building c. Increase in accounts payable d. Increase in retained earnings e. Cash dividend paid to stockholders f. Taxes paid to the federal government Indicate whether each item should be classified as a cash flow from operating activities, a cash flow from investing activities, or a cash flow from financing activities.

a. operating b. investing c. operating d. operating e. financing f. operating

The effects of paying salaries for the current period are to: increase assets and increase stockholders' equity. increase assets and increase liabilities. decrease assets and decrease liabilities. decrease assets and decrease stockholders' equity.

decrease assets and decrease stockholders' equity.