ACCT20100 Chapter 3: Chapter 3 Notes

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fuchsiahound508

3 Oct 2016

School

Department

Accountancy

Course

ACCT20100

Professor

Schmuhl

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Document Summary

Chapter 3: operating decisions and the accounting system. Begins when a company receives goods to sell, pays for them, and sells them to customer ends when customers pay cash to the company. An increase in revenues often leads to increase in assets, usually cash or accounts receivable. If a customer pays for goods or services in advance, a liability account, usually unearned. Revenue, is created: expenses: outflows or the using up of assets or increases in liabilities from ongoing operations incurred to generate revenues during the period. Expenditure: any outflow of cash for any purpose. Not all cash expenditures are expenses, but expenses are necessary to generate revenues chipotle cannot gain revenue from food sales if it does not incur the costs of supplies, utilities, etc. Cash basis accounting: revenues are only recognized when cash is received (cash receipts, expenses are only recognized when cash is paid (cash payments, not accepted by the gaap.

Related Questions

Question 11

The Kerchin Company purchased $60,000 worth of stock in theXeronics company in 2006. In 2012 the stock was sold for $78,000.On the statement of cash flows prepared using the indirect methodthe company will report:

	A.	a subtraction of $60,000 in the investing section.
	B.	an addition to net income of $18,000 in the operatingsection.
	C.	a subtraction from net income of $18,000 in the operatingsection.
	D.	an addition of $18,000 in the investing section.

2 points

Question 12

When preparing the operating section of a statement of cashflows using the indirect method, various adjustments are needed.Which of the following adjustments is incorrectly stated?

	A.	Add gains on sale of equipment.
	B.	Add to net income any increases in current liabilities.
	C.	Add to net income depreciation and amortization expense.
	D.	Deduct any increases in inventories from net income.

2 points

Question 13

In 2011 Armstrong Company sold for $76,000 cash, an asset whichhad an original cost of $204,000 and accumulated depreciation of$98,000. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$30,000.
	B.	a subtraction from net income of $30,000 in the operatingsection.
	C.	a subtraction of $106,000 in the investing section.
	D.	an addition of $76,000 in the investing section.
	E.	Both A and D are correct.

2 points

Question 14

In 2011 Covington Company sold an asset which had an originalcost of $54,000 and accumulated depreciation of $28,000 for $15,000in cash. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$11,000.
	B.	a subtraction from net income in the operating section of$11,000.
	C.	a source of cash of $15,000 in the investing section.
	D.	a use of cash in the investing section of $39,000.
	E.	Both a and c are correct.

2 points

Question 15

Henry Company's statement of cash flows indicated a $52,000decrease in cash during the year. The statement also indicated that$63,000 was provided by operating activities and $71,000 was usedby investing activities. How much are net cash used by financingactivities?

	A.	$86,000
	B.	($44,000)
	C.	$42,000
	D.	$40,000

2 points

Question 16

Which of the following would be an example of a cashequivalent?

	A.	Notes receivable.
	B.	Accounts receivable.
	C.	Money market funds.
	D.	Investment in GMC stock.

2 points

Question 17

Carte Company reported cost of goods sold for $100,000 anddepreciation expense totaling $7,000. On January 1, Carte hadinventory and accounts payable of $21,000 and $24,000,respectively. On December 31, inventory and accounts payable were$28,000 and $20,000, respectively. Net income is $60,000. Beginningaccounts receivable was $13,000 and ending was $12,000. How muchare the cash flows from operating activities using the indirectmethod?

	A.	$57,000
	B.	$50,000
	C.	$65,000
	D.	$77,000

2 points

Question 18

The statement of cash flows is typically used to determine if acompany can:

	A.	generate enough cash to pay cash dividends to stockholders.
	B.	generate enough cash to pay an increase in employees wages.
	C.	generate enough cash to acquire another company.
	D.	generate enough cash to buy equipment.

2 points

Question 19

Cash flows related to buying and selling long-term assets areclassified as:

	A.	financing activities.
	B.	investing activities.
	C.	non-cash activities.
	D.	operating activities.

2 points

Question 20

Given the following information, what amount of cash wascollected from customers during 2012? All sales are on account.

	2011	2012
Accounts receivable	$ 800,000	$ 580,000
Sales	3,100,000	3,250,000

	A.	$2,880,000
	B.	$3,620,000
	C.	$2,670,000
	D.	$3,470,000

2 points

crimsonshark725

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

Lansing Companyâs 2015 income statement and selected balancesheet data (for current assets and current liabilities) at December31, 2014 and 2015, follow.

LANSING COMPANY Income Statement For Year Ended December 31, 2015
Sales revenue	$	62,200
Expenses
Cost of goods sold		21,000
Depreciation expense		4,500
Salaries expense		10,000
Rent expense		3,000
Insurance expense		1,700
Interest expense		1,800
Utilities expense		1,500

Net income	$	18,700

LANSING COMPANY Selected Balance Sheet Accounts
At December 31	2015		2014
Accounts receivable		$360		$371
Inventory		96		75
Accounts payable		123		130
Salaries payable		47		39
Utilities payable		13		10
Prepaid insurance		10		11
Prepaid rent		13		11

Required:

Prepare the cash flows from operating activities section only ofthe companyâs 2015 statement of cash flows using the directmethod. (Amounts to be deducted should be indicatedwith a minus sign.)

LANSING COMPANY
Cash Flows from OperatingActivitiesâDirect Method
For Year Ended December 31,2015
Cash flows from operatingactivities
Cash receipts from customers
Cash payments for rent
Cash payments for interest
Cash payments for utilities
Cash payments for insurance
Cash payments for salaries
Cash payments to suppliers

Net cash provided by operatingactivities	$0

PLEASE CALCUALATE EACH ACTIVITIES

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ACCT20100 Chapter 3: Chapter 3 Notes

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