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Chap2Solution - Chapter 2 Solutions 1 2-5 How is the income...

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Chapter 2 Solutions 1
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2-5. How is the income statement related to the balance sheet? The earnings (less dividends) reported in the income statement is transferred to the ownership section of the balance sheet as retained earnings. Thus, what we earn in the income statement becomes part of the ownership interest in the balance sheet. 2-8. What are the three primary sections of the statement of cash flows? In what section would the payment of a cash dividend be shown? The sections of the statement of cash flows are: Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities The payment of cash dividends falls into the financing activities category. 5. Given the following information, prepare, in good form, an income statement for Goodman Software, Inc. Selling and administrative expense ........................................ $ 50,000 Depreciation expense ............................................................. 80,000 Sales ....................................................................................... 400,000 Interest expense ...................................................................... 30,000 Cost of goods sold .................................................................. 150,000 Taxes ...................................................................................... 18,550 2-5. Solution: Goodman Software, Inc.
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