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Cash flow from investing activities is considered the most important category on the
statement of cash flows because it is considered the best measure of expected income.
Answer:
On January 1, 2013 Grier Company purchased and installed a telephone system at a
cost of $20,000. The equipment was expected to last five years with a salvage value of
$3,000. On January 1, 2014 more telephone equipment was purchased to tie-in with the
current system for $10,000. The new equipment is expected to have a useful life of four
years. Through an error, the new equipment was debited to Telephone Expense. Grier
Company uses the straight-line method of depreciation.
Instructions
Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation
Expense, and Net Income for each year and in total beginning in 2014 through the
useful life of the new equipment.
Answer:
A loss on sale of equipment is added to net income in determining cash provided by
operations under the indirect method.
Answer:
The statement of cash flows is a required statement that must be prepared along with an
income statement, balance sheet, and retained earnings statement.
Answer:
On March 9, Phillips gave Jackson Company a 60-day, 12% promissory note for
$5,200. Phillips honors the note on May 8. Record the collection of the note and interest
by Jackson assuming that no interest has been accrued.
Answer:
Cash and supplies are both classified as current assets.
Answer:
Under the indirect method, retained earnings is adjusted for items that affected reported
net income but did not affect cash.
Answer:
