Chapter 9
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From the following list, identify whether the change in the account balance during the year would be reported as an
operating (O), an investing (I), or a financing (F) cash flow, or not separately reported on the statement of cash flows (N).
Assume that the indirect method is used to determine the cash flows from operating activities.
160. Taxes payable
161. Salaries and wages payable
162. Other accrued liabilities
163. Notes payable
164. Current maturities of long-term debt
165. Accounts payable
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175. What is meant by the term current maturities of long-term debt in the Current Liabilities section of the balance sheet?
176. What is the purpose of the current ratio? How does the quick ratio differ from the current ratio?
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177. Cole Company had the following accounts and balances on December 31, 2017:
Income Taxes Payable $ 51,250
Cash 20,000
Notes Payable, 10%, due June 2, 2018 1,000
Accounts Receivable 267,500
Equipment 950,000
Accounts Payable 104,400
Inventory 85,000
Land 600,000
Allowance for Doubtful Accounts 12,000
Discount on Notes Payable 150
Notes Receivable, maturity 2/1/2024 5,000
Current Maturities of Long-Term Debt 6,900
Unearned Revenue 4,320
Interest Payable 1,010
Wages Payable 6,000
Marketable Securities 40,000
Capital Stock 900,000
1.Compute Cole’s working capital.
2. Compute Cole’s current ratio. What does this ratio indicate about Cole’s condition?
2.
Current Ratio = Current Assets/Current Liabilities
Chapter 9
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(2) By how much did Hanover’s long– and short-term borrowings change from 2017 to 2018? Give a possible explanation
for the change in debt. What other financial statement would be useful in analyzing the change in borrowings? Why?
2018. It is possible that some money was borrowed short term to pay back long-term debt. The other financial statement
that would be useful in analyzing these changes is the statement of cash flows. The Financing Activities category gives
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180. Refer to the account information for Hanover, Inc.
Required
Calculate the current and quick ratios for 2018 and 2017. Comment on the direction and significance of the change in the
ratios.
181. What are examples of accounts that might be classified as accrued liabilities in the Current Liabilities section of the
balance sheet?
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182. Each of the following situations involves the use of discounts:
1. How much discount may Mallory Inc. take in each of the following transactions? What was the annualized interest
rate?
2. Calculate the discount rate that Mallory received in each of these transactions.
a. Mallory purchased office supplies costing $450 and paid within the discount period with a check for $425.
b. Mallory purchased merchandise for $1,900. It paid within the discount period with a check for $1,870.
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183. Newton Industries had the following transactions during the year:
1. Analyze the impact on the accounting equation of the entries relating to these transactions.
2. Assume that Newton’s accounting year ends on December 31. Prepare any necessary adjusting journal entries.
3. What is the total of the current liabilities at the end of the year?
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4. Effective interest rate = $1,575/$19,425 = 8.11%