ACC 201 Homework 7 correct

Source of funds come from the investments from owners

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Source of Funds come from the investments from Owners (Owner's Equity) and the borrowings from Creditors (Liabilities) These funds are used to invest in Assets - items under the control of the organization that can bring them future economic benefits. Owners invest through an initial contribution (Contributed capital) and by retaining a certain portion of their earnings (Retained Earnings). Obligations to Creditors due wuthin a year are called Current Liabilities and the rest, Long-term Liabilities. Assets that are expected to be turned into cash within a year are called Current Assets and the rest, Long-term Assets. Every transaction calls for a change in two or more of these accounts while preserving the balance of this accounting equation. Transactions during first operating cycle 1 Owners contributed capital to the business 1927 2 Business borrowed money from bank 1000 3 Invested in equipments (start-up costs) 1300 4 Spent on other start-up costs 800 5 0 6 0 7 Rent 100 8 Manager Salary 100 9 0 10 0 11 Advertising 350 12 Revenue 1350 13 Paid wages 150 14 Insurance 100 15 Recognize all expenses incured to generate this revenue Interest payable 6.67 Accounting fee payable 8 Depreciation expense 19.1666667 Use of inventories; prepaid rent & insurance 450 Transaction Analysis Use of Funds Total $ CF from operations -800 0 0 -100 -100 0 0 -350 1350 -150 -100 -250 4 7 8 11 12 13 14 CF from investments -1300 -1300 3 CF from financing 1927 1000 2927 Cash 1 2 1377 Current assets 0 100 350 -450 0 11 13 15d Long-term assets 1300 -19.166667 1281 3 15c Total Assets 2658 Source of Funds Current liabilities 6.67 8 15.00 15a 15b Long-term liabilities 1000 1000 2 Contributed capital 1927 1927 1 Earnings -800 0 -100 0 0 1350 -150 -100 -6.67 -8 -19.16667 -450 -284 4 7 12 13 14 15a 15b 15c 15d Dividends 0 Total Liabilities plus Owner's Equity 2658 Use of Funds (Assets) = Source of Funds (Liabilities + Owner's Equity) [Current assets + Long-term assets] = [Current liabilities + Long-term liabilities] + [Contributed capital + Retained earnings]
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Cash Flow Statements for OC-1 Y1 Y2 Y3 Y4 Y5 Y:1-5 Sale of product/service 1350
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