Homeworksolution-ch.5

Homeworksolution-ch.5 - EXERCISE 5-3(15-20 minutes...

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EXERCISE 5-3 (15-20 minutes) Financial Classification Monetary Instrument (a) 1. (b) 2 X (c) 6. or 7. (d) 1. (e) 6. (f) 4. (g) 1. X X (h) 6. X X (i) 1. X X (j) 6. X X (k) 1. or 5. (l) 3. and N (m) 2. (n) 6. X X (o) X. (p) 3. (q) 11. (r) 6. X X (s) 2.
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EXERCISE 5-9 (30-35 minutes) (a) Scarlatti Corp. Partial Balance Sheet As at December 31, 2007 Current assets Cash $1,222,356* Accounts receivable $1,193,341** Less allowance for doubtful accounts 197,00 0 996,3 41 Inventories 942,500*** Prepaid expenses 19,000 Total current assets $3,180,197 Current liabilities Accounts payable $1,881,500 a Notes payable 841,000 b Total current liabilities $2,722,500 *(b) Current ratio – Deteriorated dramatically Before Restatement Restated $2,925,000 $3,180,197 $1,881,000 $2,722,500 1.555 1.168 (c) Adjustment to retained earnings balance: Add: January sales discounts $ 2,517 Deduct: January sales $447,00 0 January purchase discounts ($741,000 X 2%) 14,820 December purchases ($127,000 - $14,500) 112,500 Consignment inventory 14,500 (588,820 ) Decrease to retained earnings $(586,303 )
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EXERCISE 5-9 (Continued) * Cash balance $ 957,000 Add: Cash disbursement after discount [$741,000 X 1 – 2%)] 726,180 1,683,180 Less: Cash sales in January ($447,000 – $121,500) (325,5 00) Cash collected on account (123,324) Bank loan proceeds ($135,324 – $123,324) (12,000 ) Adjusted cash $1,222,356 ** Accounts receivable balance $1,189,000 Add: Accounts reduced from January collection ($123,324 plus 2% discount of $2,517) 125,841 1,314,841 Deduct: Accounts receivable in January (121,500 ) Adjusted accounts receivable $1,193,341 *** Inventories $957,000 Less: Inventory received on consignment 14,500 Adjusted inventories $942,500 a Accounts payable balance $1,028,000 Add: Cash disbursements $741,000 Purchase invoice omitted ($127,000 – $14,500) 112,500 853,500 Adjusted accounts payable $1,881,500 b Notes payable balance $ 853,000 Less: Proceeds of bank loan 12,000 Adjusted notes payable $ 841,000
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EXERCISE 5-12 (15-20 minutes) (a) Nicholson Industries Inc. Statement of Cash Flows For the Year Ended December 31, 2007 Cash flows from operating activities Net income $129,000 Adjustments to reconcile net income to net cash provided by operating activities: Amortization expense $27,000 Increase in accounts receivable (50,000) Increase in inventory (31,000) Decrease in accounts payable (7,000) (61,000) Net cash provided by operating activities 68,000 Cash flows from investing activities Purchase of equipment (60,000) Sale of land 39,000 Net cash used by investing activities (21,000) Cash flows used by financing activities Payment of cash dividends (60,000) Net cash used by financing activities (60,000) Net decrease in cash (13,000) Cash at beginning of year 34,000 Cash at end of year $21,000 Note: During the year, Nicholson retired $50,000 in bonds payable by issuing common shares. (b)
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This note was uploaded on 10/18/2010 for the course BUS ACC415 taught by Professor Bibijohn during the Spring '09 term at Seneca.

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Homeworksolution-ch.5 - EXERCISE 5-3(15-20 minutes...

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