ACC301-sol-ch05

ACC301-sol-ch05 - PRACTICE EXERCISES PRACTICE 51 CASH AND...

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PRACTICE EXERCISES PRACTICE 5–1 CASH AND CASH EQUIVALENTS (a) Not cash equivalent because it is an equity investment; no maturity date. (b) Cash equivalent of $5,700 because time to maturity at date of purchase was less than  three months. (c) Cash of $3,400. (d) Not cash equivalent because time to maturity at date of purchase was greater than  three months. $5,700 + $3,400 = $9,100 PRACTICE 5–2 THREE CATEGORIES OF CASH FLOWS Cash Inflow Operating (Outflow) (d) Cash collected from customers $10,000 (b) Cash paid for interest (450) (f) Cash paid for income taxes    (1,320 ) Total $  8,230 Investing (a) Cash received from sale of a building $  5,600 Financing (c) Cash paid to repurchase shares of stock (treasury stock) (1,000) (e) Cash paid for dividends       (780 ) Total $ (1,780) PRACTICE 5–3 CASH FLOW PATTERNS Company A start up, high growth Company B cash cow Company C steady state PRACTICE 5–4 NONCASH INVESTING AND FINANCING ACTIVITIES
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Noncash Investing Financing (Disclose only) (a) $(40,000) $           0 $ 80,000 (b) 0 0 67,000 (c) 0 0 100,000 (d)              0 56,000   (30,000 ) Total $(40,000 ) $  26,000
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PRACTICE 5–5 GENERAL FORMAT FOR A STATEMENT OF CASH FLOWS Cash flow from operating activities $   4,300 Cash flow from investing activities (15,000) Cash flow from financing activities    10,000 Net decrease in cash $     (700) Cash balance, beginning of year      3,200 Cash balance, end of year $   2,500 PRACTICE 5–6 CASH COLLECTED FROM CUSTOMERS Accounts receivable, beginning $  1,375 Plus: Sales   10,000 Cash available for collection $11,375 Less: Accounts receivable, ending     1,400 Cash collected from customers $  9,975 PRACTICE 5–7 CASH PAID FOR INVENTORY PURCHASES Inventory, ending $2,500 Plus: Cost of goods sold   5,300 Required inventory $7,800 Less: Beginning inventory   2,100 Inventory purchased this year $5,700 Accounts payable, beginning $1,200 Plus: Inventory purchased this year   5,700 Accounts to be paid $6,900 Less: Accounts payable, ending   1,350 Cash paid for inventory purchases $5,550 PRACTICE 5–8 CASH PAID FOR OPERATING EXPENSES Prepaid operating expenses, ending $1,000
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Plus: Operating expenses     3,800 Required cash outlay for operating expenses$4,800 Less: Prepaid operating expenses, beginning     700 Cash paid for operating expenses this year$4,100
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PRACTICE 5–9 DIRECT METHOD Income Statement Adjustments Statement of Cash Flows Sales $ 4,000 + 290 $ 4,290 Cost of goods sold (1,700) 500 130 (2,330) Interest expense (350) 60 (410) Depreciation expense (800 ) + 800 0 Net income $ 1,150 $ 1,550 Direct Method: Cash collected from customers $ 4,290 Cash paid for inventory purchases (2,330) Cash paid for interest (410 ) Net cash flow from operating activities
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This note was uploaded on 06/11/2009 for the course ACC 301 taught by Professor Pendarvis during the Spring '09 term at St. Leo.

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ACC301-sol-ch05 - PRACTICE EXERCISES PRACTICE 51 CASH AND...

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