AC 302 WEEK 9 Willy Exercise 23 Questions AND Pro

AC 302 WEEK 9 Willy  Exercise 23 Questions AND Problem
Exercise 23 Question 1
 
 	Your answer is correct 	 
Red Hot Chili Peppers Co. had the following activity in its most recent year of operations.

Classify the items as (1) operating—add to net income; (2) operating—deduct from net income; (3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.
		Items		
(a)		Purchase of equipment.		 

(b)		Redemption of bonds payable.		 

(c)		Sale of building.		 

(d)		Depreciation.		 

(e)		Exchange of equipment for furniture.		 

(f)		Issuance of capital stock.		 

(g)		Amortization of intangible assets.		 

(h)		Purchase of treasury stock.		 

(i)		Issuance of bonds for land.		 

(j)		Payment of dividends.		 

(k)		Increase in interest receivable on notes receivable.		 

(l)		Pension expense exceeds amount funded.		 

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Exercise 23-4
 	 
The income statement of Vince Gill Company is shown below.
VINCE GILL COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales revenue				$6,838,230
Cost of goods sold				
   Beginning inventory		$1,892,590		
   Purchases		4,491,700		
   Goods available for sale		6,384,290		
   Ending inventory		1,604,900		
   Cost of goods sold				4,779,390
Gross profit				2,058,840
Operating expenses				
   Selling expenses		445,390		
   Administrative expenses		690,340		1,135,730
Net income				$923,110

Additional information:
1.		Accounts receivable decreased $319,050 during the year.
2.		Prepaid expenses increased $172,380 during the year.
3.		Accounts payable to suppliers of merchandise decreased $272,020 during the year.
4.		Accrued expenses payable decreased $129,100 during the year.
5.		Administrative expenses include depreciation expense of $58,190.

Prepare the operating activities section of the statement of cash flows using the direct method.

Solution 
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Exercise 23-4
Cash receipts from customers				
     Sales revenue				$6,838,230
     Add: 	Decrease in accounts receivable				319,050
     Cash receipts from customers				$7,157,280

Cash payments to suppliers				
     Cost of goods sold				$4,779,390
     Deduct: 	Decrease in inventories				287,690
     Purchases				4,491,700
     Add: 	Decrease in accounts payable				272,020
     Cash payments to suppliers				$4,763,720

Cash payments for operating expenses					
     Operating expenses, exclusive of depreciation				$1,077,540	*
     Add: 	Increase in prepaid expenses		$172,380			
	Decrease in accrued expenses payable		129,100		301,480	 
     Cash payments for operating expenses				$1,379,020	 

 

Exercise 23-18
 
 	Your answer is correct. 
 	 
The accounts below appear in the ledger of Anita Baker Company.
		Retained Earnings		Dr.		Cr.		Bal.
Jan. 1, 2014		Credit Balance						$42,460
Aug. 15		Dividends (cash)		$14,100				28,360
Dec. 31		Net Income for 2014				$50,150		78,510
 								
		Equipment		Dr.		Cr.		Bal.
Jan. 1, 2014		Debit Balance						$140,600
Aug. 3		Purchase of Equipment		$62,430				203,030
Sept. 10		Cost of Equipment Constructed		47,890				250,920
Nov. 15		Equipment Sold				$66,180		184,740
 								
		Accumulated Depreciation—Equipment		Dr.		Cr.		Bal.
Jan. 1, 2014		Credit Balance						$83,240
Apr. 8		Extraordinary Repairs		$21,150				62,090
Nov. 15		Accum. Depreciation on Equipment Sold		25,670				36,420
Dec. 31		Depreciation for 2014				$16,990		53,410

From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect method. The loss on sale of equipment (November 15) was $6,520. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
 
 
Solution 
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Exercise 23-18
Sale of Equipment = [($66,180 - $25,670) - $6,520] = $33,990


Problem 23-2
 
 	Your answer is correct. 
 	 
The comparative balance sheets for Hinckley Corporation show the following information.
		December 31
		2014		2013
Cash		$39,670		$14,690
Accounts receivable		14,260		11,650
Inventory		15,450		9,940
Investments		-0-		3,810
Buildings		-0-		30,730
Equipment		52,990		20,780
Patents		5,500		7,060
		$127,870		$98,660
 				
Allowance for doubtful accounts		$3,370		$5,130
Accumulated depreciation—equipment		2,610		4,930
Accumulated depreciation—building		-0-		6,130
Accounts payable		5,500		3,810
Dividends payable		-0-		4,350
Notes payable, short-term (nontrade)		2,470		3,640
Long-term notes payable		32,940		25,890
Common stock		43,900		33,950
Retained earnings		37,080		10,830
		$127,870		$98,660

Additional data related to 2014 are as follows.
1.		Equipment that had cost $11,500 and was 40% depreciated at time of disposal was sold for $4,290.
2.		$9,950 of the long-term note payable was paid by issuing common stock.
3.		Cash dividends paid were $4,350.
4.		On January 1, 2014, the building was completely destroyed by a flood. Insurance proceeds on the building were $32,480 (net of $2,960 taxes).
5.		Investments (available-for-sale) were sold at $1,270 above their cost. The company has made similar sales and investments in the past.
6.		Cash was paid for the acquisition of equipment.
7.		A long-term note for $17,000 was issued for the acquisition of equipment.
8.		Interest of $2,740 and income taxes of $7,650 were paid in cash.

Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
 
 
 
 




IFRS Multiple Choice Question 06
 
 	Your answer is correct. 
 	 
Which of the following is false with regard to IFRS and the statement of cash flows?

 
 
The IASB is strongly in favor of requiring use of the direct method for operating activities.
 
In certain circumstances under IFRS, bank overdrafts are considered part of cash and cash equivalents.
 
IFRS requires that noncash investing and financing activities be excluded from the statement of cash flows.
 
All of the above statements are false with regard to IFRS and the statement of cash flows.
IFRS Multiple Choice Question 07
 
 	Your answer is correct. 
 	 
Ocean Company follows IFRS for its external financial reporting. Which of the following methods of reporting are acceptable under IFRS for the items shown?
	Interest paid	Dividends paid

 
 
Operating	Investing

 
Investing	Financing

 
Financing	Investing

 
Operating	Financing

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IFRS Multiple Choice Question 08
 
 	Your answer is correct. 
 	 
Ocean Company follows IFRS for its external financial reporting. Which of the following methods of reporting are acceptable under IFRS for the items shown?
	Interest received	Dividends received

 
 
Operating	Investing

 
Financing	Investing

 
Investing	Financing

 
Operating	Financing

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IFRS Multiple Choice Question 09
 
 	Your answer is correct. 
 	 
Wave, Inc. follows IFRS for its external financial reporting. The statement of cash flows reports changes in cash and cash equivalents, which of the following is not considered cash or a cash equivalent under IFRS?

 
 
Bank overdrafts.
 
Commercial paper.
 
Accounts receivable.
 
Coin.
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IFRS Multiple Choice Question 10
 
 	Your answer is correct. 
 	 
Surf Company follows IFRS for its external financial reporting. The following amounts were available at December 31, 2013:
Interest paid		$22,000
Dividends paid		16,000
Taxes paid		37,000

Under IFRS, what is the maximum amount that could be reported for cash used by operating activities for Surf Company for the year ended December 31, 2013?

 
 
$38,000
 
$53,000
 
$75,000
 
$59,000