Solution to Assignment #4

# Solution to Assignment #4 - STEP 1 set up the basic...

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STEP 1. set up the basic structure of the worksheet STEP 2. figure out net income derive net income from retained earnings 0) Retained Earnings (B/S) 5,000 B.B. net income?? dividends declared? (may or may not paid) 20,750 E.B. Solve for dividends declared: Dividends Payable (B/S) 6,000 B.B. dividends declared? 3) dividend paid 6,000 0 E.B. ==> dividends declared = 0 ==> net income = 20,750 - 5,000 = 15,750 STEP 3. analyze additional information using journal entries 1) cash [investing] 2,500 4,400 loss [operating] 4,100 equipment 11,000 2) note payable 10,000 common shares 10,000 (no cash effect - supplemental disclosure) 3) dividends payable 6,000 cash [financing] 6,000 4) cash [investing] 37,000 (before tax) accumulated amort. - building 6,000 building 29,750 extraordinary gain [operating] 13,250 5) cash [investing] 5,500 gain [operating] 2,500 investment - available for sale 3,000 6) equipment 15,000 cash [investing] 15,000 7) equipment 16,000 note payable 16,000 (no cash effect - supplemental disclosure) 8) interest expense 2,000 cash 2,000 accumulated amort. - equipment (11,000 × 40%)

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income tax expense 5,000 cash 5,000 (supplemental disclosure) STEP 4. prepare the section of operating cash flows Adjustment type 1. non-cash items: amortization expenses 9) from B/S amort. accounts and related additional data Accumulated Amort. - Equipment 4,500 B.B. 1) write-off
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## This note was uploaded on 10/16/2010 for the course ACCO Acco 320 taught by Professor Luohe during the Spring '10 term at Concordia Canada.

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Solution to Assignment #4 - STEP 1 set up the basic...

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