ACC 206 Week 1 Assignment

 Please complete the following 5 exercises below in
either Excel or a word document (but must be single document). You must show
your work where appropriate (leaving the calculations within Excel cells is
acceptable). Save the document, and submit it in the appropriate week using the
Assignment Submission button.


 

1.      Critical Thinking Question:

Answer
the following questions:

Why are noncash transactions, such as the exchange of common stock for a
building for example, included on a statement of cash flows? How are these noncash
transactions disclosed?

 

2.     
Classification
of activities

Classify
each of the following transactions as arising from an operating (O), investing
(I), financing (F), or noncash investing/financing (N) activity.

a.      
________
Received $80,000 from the sale of land.

b.     
________ Received $3,200 from cash
sales.

c.      
________ Paid a $5,000 dividend.

d.     
________ Purchased $8,800 of merchandise
for cash.

e.      
________ Received $100,000 from the
issuance of common stock.

f.      
________ Paid $1,200 of interest on a
note payable.

g.     
________ Acquired a new laser printer by
paying $650.

h.     
________ Acquired a $400,000 building by
signing a $400,000 mortgage note.

 

3.     
Overview
of direct and indirect methods


Evaluate
the comments that follow as being True or False. If the comment is false,
briefly explain why.

a.      
Both the direct and indirect methods
will produce the same cash flow from operating activities.

 

b.     
Depreciation expense is added back to
net income when the indirect method is used.

 

c.      
One of the advantages of using the
direct method rather than the indirect method is that larger cash flows from
financing activities will be reported.

 

d.     
The cash paid to suppliers is normally
disclosed on the statement of cash flows when the indirect method of statement
preparation is employed.

 

e.      
The dollar change in the Merchandise
Inventory account appears on the statement of cash flows only when the direct
method of statement preparation is used.

 

4.     
Equipment transaction and cash flow reporting





Dec.
31, 20X4



Dec.
31, 20X3





Property,
Plant & Equipment:
Land



 
$94,000



 
$94,000





Equipment



652,000


527,000




Less:
Accumulated depreciation


-316,000


-341,000




 

New
equipment purchased during 20x4 totaled $280,000. The 20x4 income statement
disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the
sale of equipment.

a.      
Determine the cost and accumulated
depreciation of the equipment sold during 20X4.

 

b.     
Determine the selling price of the
equipment sold.

 

c.      
Show how the sale of equipment would
appear on a statement of cash flows prepared by using the indirect method.

 

5.     
Cash
flow information: Direct and indirect methods

The
comparative year-end balance sheets of Sign Graphics, Inc., revealed the
following activity in the company's current accounts:





20X5



20X4


Increase
/ Decrease)





Current
assets







Cash



$55,400



$35,200



$20,200

 



Accounts
receivable (net)


83,800


88,000


-4,200

 



Inventory



243,400


233,800


9,600

 



Prepaid
expenses


25,400


24,200


1,200

 






 



Current
liabilities




 



Accounts
payable


$123,600



$140,600



($17,000)

 



Taxes
payable


43,600


49,200


-5,600

 



Interest
payable


9,000


6,400


2,600

 



Accrued
liabilities


38,800


60,400


-21,600

 



Note
payable


44,000






44,000

 






 



The
accounts payable were for the purchase of merchandise. Prepaid expenses and
accrued liabilities relate to the firm's selling and administrative expenses.
The company's condensed income statement follows.




SIGN GRAPHICS INC.




Income Statement




for the Year Ended
December 31, 20x5





 


 


 


 


 


 


 


 


 




Sales








$713,800


 




Less:
Cost of goods sold






323,000


 




Gross
profit







$390,800


 




 









 




Less:
Selling & administrative expenses



$186,000




 




Depreciation
expense


 





17,000




 




     Interest expense  


 





27,000



230,000


 




 









 




Add:
gain on sale of land






$160,800


 




 








21,800


 




Income
before taxes






$182,600


 




Income
taxes







36,800


 




Net
income







$145,800


 




 


 


 


 


 


 


 


 


 




 

Other
data:

1.     
Long-term investments were purchased for
cash at a cost of $74,600.

2.     
Cash proceeds from the sale of land
totaled $76,200.

3.     
Store equipment of $44,000 was purchased
by signing a short-term note payable. Also, a $150,000 telecommunications
system was acquired by issuing 3,000 shares of preferred stock.

4.     
A long-term note of $49,400 was repaid.

5.     
Twenty thousand shares of common stock
were issued at $5.19 per share.

6.     
The company paid cash dividends
amounting to $128,600.

 

Instructions:


a.      
Prepare the operating activities section
of the company's statement of cash flows, assuming use of:

1.     
The direct method.

 

2.     
The indirect method.

 

b.     
Prepare the investing and financing
activities sections of the statement of cash flows.
Powered by