Chapter 5 HW Solutions.docx - Solutions to Chapter 5 Online Material Questions 1 E 2 B 3 B 4 D 5 B 6 B Exercise 1 Cost of Goods Sold Less Increase in

Chapter 5 HW Solutions.docx - Solutions to Chapter 5 Online...

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Solutions to Chapter 5 Online Material: Questions: 1. E 2. B 3. B 4. D 5. B 6. B Exercise 1: Cost of Goods Sold: (1,000,000) Less: Increase in Inventory: (250,000) Add: Increase in Accounts Payable 150,000 Cash Payments to Suppliers: (1,100,000) Exercise 2: Cost of Goods Sold: (750,000) Less: Increase in Inventory: (200,000) Less: Decrease in Accounts Payable: (50,000) Cash Payments to Suppliers 1,000,000 Exercise 3: Insurance Expense: (10,000) Add: Beginning Prepaid Insurance: 2,000 Less: Ending Prepaid Insurance: (500) Cash Payments for Insurance: (8,500)
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Exercise 4 Sales Revenue 3,750,000 Add: Beginning Trade Receivables 100,000 Less: Ending Trade Receivables (125,000) Less: Write-Offs (32,000) Cash Receipts from Customers: 3,693,000 Exercise 5: Sales Revenue 10,000,000 Add: Decrease in Trade Receivables 1,000,000 Cash Receipts from Customers: 11,000,000 Cases: Case 5-1: The operating section of the statement of cash flows using the direct method would be presented as follows: Cash Flows from Operations: Cash Receipts from Customers 6,050,000 Cash Payments: Purchase of Inventory: (4,150,000) Payment for Insurance: (50,000) Payment for Taxes: (195,000) Payment for Other Expense: (60,000) Net Cash from Operating Activities: 1,595,000 Cash Receipts from Customers: Sales Revenue: $6,000,000 Less: End Trade Receivables (400,000) Add: Beginning Trade Receivables 450,000 Cash Receipts from Customers: 6,050,000
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Cash Paid for Inventory: Cost of Goods Sold: (4,000,000) Less: Increase in Inventory: (100,000) Less: Decrease in Trade Payables: (50,000) Cash Paid for Inventory: (4,150,000) Case 5-2: The operating section of the statement of cash flows using the indirect method would be presented as follows: Cash Paid for Insurance: Insurance Expense: (25,000) Less: Increase In Prepaid Insurance (25,000) Cash Paid for Insurance: (50,000) Cash Paid for Taxes: Income Tax Expense: (200,000) Add: Increase in Taxes Payable: 5,000 Cash Paid for Income Taxes: (195,000) Cash Paid for Other Expense: Other Operating Expenses: (85,000) Add: Insurance Expense; 25,000 Cash Paid for Other Expenses: (60,000) Cash Flows from Operating Activities: Profit for the Year: 1,665,000 Adjustments: Add: Depreciation and Amortization: 100,000
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Less: Gain on Sale of Fixed Assets (50,000) Add: Decrease in Trade Receivables 50,000 Less: Increase in Inventory
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