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Required:

Prepare a reconciliation of net income to net cash flows from operating activities.

Answer:

Net income

$300,000

Adjustments for noncash effects:

Depreciation expense

15,000

Increase in inventory

(2,000

)

Decrease in interest payable

(1,600

)

Increase in accounts receivable

( 1,400

)

Decrease in bond premium

(3,000

)

Increase in accounts payable

7,000

Net cash flows from operating activities

$314,000

Learning Objective: 4 Level of Learning: 3

113. The accounting records of Westlake Industries provided the data below.

Net income

$200,000

Depreciation expense

15,000

Decrease in inventory

12,000

Increase in accounts receivable

1,400

Increase in interest payable

1,600

Amortization of bond discount

3,000

Increase in accounts payable

7,000

Cash dividends paid

20,000

Required:

Prepare a reconciliation of net income to net cash flows from operating activities.

Answer:

Net income

$200,000

Adjustments for noncash effects:

Depreciation expense

15,000

Decrease in inventory

12,000

Increase in interest payable

1,600

Increase in accounts receivable

(1,400

)

Decrease in bond discount

3,000

Increase in accounts payable

7,000

Net cash flows from operating activities

$237,200

Learning Objective: 4 Level of Learning: 3

114. Prepare the spreadsheet entries necessary to determine the amount of cash received from customers for each of the four independent situations below.

Sales

Accounts

Bad debt

Allowance for

Cash received

Situation

revenue

receivable

expense

uncollectible

from customers

иииисс

inc (dec)

inc (dec)

accounts

1

200,000

10,000

0

0

2

200,000

(10,000)

0

0

3

200,000

(10,000)

2,000

1,000

4

200,000

10,000

2,000

(1,000)

Answer:

(1.)

Cash

190,000

Accounts receivable

10,000

Sales revenue

200,000

(2.)

Cash

210,000

Accounts receivable

10,000

Sales revenue

200,000

(3.)

Cash

209,000

Bad debt expense

2,000

Allowance for uncollectible accounts

1,000

Accounts receivable

10,000

Sales revenue

200,000

(4.)

Cash

187,000

Bad debt expense

2,000

Allowance for uncollectible accounts

1,000

Accounts receivable

10,000

Sales revenue

200,000

Learning Objective: 3 Level of Learning: 3

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