Chapter 12

# Chapter 12 - CHAPTER 12 CHAPTER 12 EXERCISE 12-11 Case 1:...

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CHAPTER 12 CHAPTER 12 EXERCISE 12-11 Case 1: Accounts Receivable Beginning balance 150,000 Credit sales 175,000 35,000 Write-offs X = Cash collections Ending balance 100,000 \$150,000 + \$175,000 – \$35,000 – X = \$100,000 X = \$190,000 \$190,000 + \$60,000 (Cash sales) = \$250,000 Case 2: Inventory Beginning balance 80,000 X = Purchases 175,000 Cost of goods sold expense Ending balance 55,000 \$80,000 + X – \$175,000 = \$55,000 X = \$150,000 Accounts Payable 25,000 Beginning balance X = Cash payments 150,000 Purchases 15,000 Ending balance \$25,000 + \$150,000 – X = \$15,000 X = \$160,000 1

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CHAPTER 12 EXERCISE 12-11 CONTINUED Case 3: Prepaid Insurance Beginning balance 17,000 X = Cash payments 15,000 Insurance expense Ending balance 20,000 \$17,000 + X – \$15,000 = \$20,000 X = \$18,000 Case 4: Income Taxes Payable 95,000 Beginning balance X = Cash payments 300,000 Tax expense 115,000 Ending balance \$95,000 + \$300,000 – X = \$115,000 X = \$280,000 2
CHAPTER 12 EXERCISE 12-12 1. First, determine the amount of dividends declared: Retained Earnings 250,000 Beginning Stock dividend 50,000 balance X = Dividends declared 285,000 Net income 375,000 Ending balance \$250,000 + \$285,000 – \$50,000 – X = \$375,000 X = \$110,000 Then, solve for the amount of dividends paid: Dividends Payable 20,000 Beginning balance X = Dividends paid 110,000 Dividends declared 30,000 Ending balance \$20,000 + \$110,000 – X = \$30,000 X = \$100,000 2. Because a stock dividend does not involve cash, it is not reported on the statement of cash flows. It is questionable whether or not a stock dividend is a significant noncash activity that should be reported on a supplemental schedule. 3

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CHAPTER 12 PROBLEM 12-1 1. Changes in account balances and explanations (in thousands of dollars): Net Change Dr. (Cr.) Explanation Cash (2) Accounts receivable 5 Inventory (10) Prepaid rent 3 Land 0 Plant and equipment 100 Purchase Accumulated depreciation (35) Depreciation expense Accounts payable (2) Income taxes payable 2 Short-term notes payable (10) Issuance Bonds payable 25 Retirement Common stock (50) Issuance Retained earnings (26 ) Net income Total 0 4
CHAPTER 12 PROBLEM 12-1 CONTINUED Statement of cash flows: CHRISMAN COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2010 (IN THOUSANDS OF DOLLARS) Cash Flows from Operating Activities Net income\$ 26 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 35 Increase in accounts receivable (5) Decrease in inventory 10 Increase in prepaid rent (3) Increase in accounts payable 2 Decrease in income taxes payable (2 ) Net cash provided by operating activities \$ 63 Cash Flows from Investing Activities Acquisition of plant and equipment \$(100 ) Cash Flows from Financing Activities 5

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CHAPTER 12 Retirement of bonds payable \$ (25) Issuance of short-term notes payable 10 Issuance of common stock 50 Net cash provided by financing activities \$ 35 Net increase (decrease) in cash \$ (2) Cash balance, December 31, 2009
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## This note was uploaded on 04/14/2011 for the course ACCT 2101 taught by Professor Christianwurst during the Spring '08 term at Temple.

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Chapter 12 - CHAPTER 12 CHAPTER 12 EXERCISE 12-11 Case 1:...

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