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
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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 = $100,000 2. Because a stock dividend does not involve cash, it is not reported on the statement of cash flows. It is questionable whether or not a stock dividend is a significant noncash activity that should be reported on a supplemental schedule. 3
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CHAPTER 12 PROBLEM 12-1 1. Changes in account balances and explanations (in thousands of dollars): Net Change Dr. (Cr.) Explanation Cash (2) Accounts receivable 5 Inventory (10) Prepaid rent 3 Land 0 Plant and equipment 100 Purchase Accumulated depreciation (35) Depreciation expense Accounts payable (2) Income taxes payable 2 Short-term notes payable (10) Issuance Bonds payable 25 Retirement Common stock (50) Issuance Retained earnings (26 ) Net income Total 0 4
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CHAPTER 12 PROBLEM 12-1 CONTINUED Statement of cash flows: CHRISMAN COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2010 (IN THOUSANDS OF DOLLARS) Cash Flows from Operating Activities Net income$ 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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