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Chapter 4
144. Which of the following would not affect the operating activities section of the statement of cash flows, using the
indirect method?
a.
Decrease in merchandise inventory
b.
Payment on a note payable
c.
Decrease in unearned rent
d.
Depreciation expense
145. Under the indirect method for preparing the statement of cash flows, decreases in current assets are _____ net income
in the cash flows from operating activities section.
a.
subtracted from
b.
added to
c.
not used in calculating
d.
cannot tell from the information given
Chapter 4
146. ONI, Inc. purchased $60,000 of equipment for cash. How does this transaction impact the statement of cash flows?
a.
Decreases the cash flow from operating activities by $60,000
b.
Decreases equipment by $60,000
c.
Decreases the cash flow from investing activities section by $60,000
d.
This transaction would not affect the statement of cash flows.
147. Based on the following data, determine the cost of merchandise sold for October.
Merchandise Inventory, October 1
$ 98,560
Merchandise Inventory, October 31
102,330
Purchases
433,880
Purchases Returns & Allowances
12,760
Purchases Discounts
9,900
Chapter 4
Transportation In
7,620
148. Merchandise with a list price of $7,500 and a cost of $7,000 is sold on account, terms 1/10, n/30. Prior to payment,
merchandise with a list price of $1,000 and a cost of $800 is returned. The correct amount is paid within the discount
period.
Record the following transactions, using the integrated financial statement framework that follows:
(a)
Sold the merchandise.
(b)
Received the returned merchandise
(c)
Received the amount owed.
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
a.
Statement of Cash Flows
Income Statement
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Chapter 4
b.
Statement of Cash Flows
Income Statement
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
c.
Statement of Cash Flows
Income Statement
Chapter 4
149. Based on the information below, illustrate the effects on the accounts and financial statements of the Seller and the
Buyer. Both use a perpetual inventory system.
(a)
Seller sells Buyer on account merchandise costing $300 for $500, terms 2/10, net 30, FOB
destination. The transportation charge is $50.
(b)
Buyer returns as defective $100 worth of the $500 merchandise received. The seller's cost is
$60.
(c)
Buyer pays within the discount period.
(a) Seller
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Statement of Cash Flows
Income Statement
(a) Buyer
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Statement of Cash Flows
Income Statement
(b) Seller
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Statement of Cash Flows
Income Statement
(b) Buyer
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Chapter 4
Statement of Cash Flows
Income Statement
(c) Seller
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Statement of Cash Flows
Income Statement
(c) Buyer
Assets = Liabilities + Stockholders' Equity
Cash
Accounts
Receivable
Merchandise
Inventory
Accounts
Payable
Capital
Stock
Retained
Earnings
Statement of Cash Flows
Income Statement
Chapter 4
Chapter 4
150. Details of invoices for purchases of merchandise are as follows:
Merchandise
Transportation
Terms
Returns and Allowances
a. $1,000
$25
FOB shipping point, 1/10, n/30
$200
b. 5,000
---
FOB destination, n/30
400
c. 4,000
50
FOB shipping point, 2/10, n/30
150
d. 5,000
---
FOB destination, 1/10, n/30
---
Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances
was received prior to payment and that all invoices were paid within the discount period. Also assume that the seller has
prepaid the transportation expenses.
151. The following data for the year ended June 30, 2016, were extracted from the accounting records of Roof Co.:
Cost of merchandise sold
$300,000
Operating expenses
95,000
Sales
450,000
Prepare a multiple-step income statement for the current year ended June 30, 2016.
Chapter 4
152. The following data for the current year ended December 31, 2016, was extracted from the accounting records of
Xender Co.:
Cost of merchandise sold
$937,200
Operating expenses
307,500
Sales
1,230,250
Prepare a multiple-step income statement for the year ended December 31, 2016.
Chapter 4
153. Prepare a multiple-step income statement for Surry Co. from the following data for the year ended December 31,
2016.
Sales, $915,000; cost of merchandise sold, $670,000; administrative expenses, $30,000; interest expense, $12,000; rent
revenue, $19,000; customer refunds and allowances, $55,000; selling expenses, $120,000.
Chapter 4
154. Selected data from the ledger of Jones Co. after adjustment at June 30, the end of the fiscal year, are listed as follows:
Accounts Receivable
$25,000
Prepaid Insurance
$ 2,250
Accumulated Depreciation
35,200
Notes Payable
60,150
Administrative Expenses
80,000
Retained Earnings
55,000
Capital Stock
40,000
Salaries Payable
3,000
Cost of Merchandise Sold
320,000
Sales (net)
550,000
Dividends
22,000
Selling Expenses
65,000
Interest Revenue
3,000
Supplies
2,750
Office Equipment
70,500
Prepare a single-step income statement for the year ended June 30, 2016.
155. State the section(s) of the statement of cash flows prepared by the indirect method (operating activities, investing
activities, financing activities, or not reported) and the amount that would be reported for each of the following
transactions:
(a)
Received $145,000 from the sale of land costing $70,000.
(b)
Purchased investments for $50,000.
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(c)
Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the beginning
of the year, and $6,000 were payable at the end of the year.
(d)
Acquired equipment for $32,000 cash.
(e)
Declared and issued 100 shares of $20 par common stock as a stock dividend, when the
market price of the stock was $32 a share.
(f)
Recognized by an adjusting entry depreciation for the year, $48,000.
(g)
Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash.
(h)
Issued $500,000 of 20-year, 10% bonds payable at 99.
(i)
Borrowed $43,000 from Busey National Bank, issuing a 5-year, 8% note for that amount.
