Accounting 2 Chapter 16 Problems Summer 2017 PDF

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ACCOUNTING 2---CHAPTER 16 PROBLEMS 1. For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash investing or financing activity. _______I___Received cash dividends from an investment in the stock of another corporation. _____O_____Collected accounts receivable from customers. ____F______Issued bonds payable for cash. _____O_____Paid wages to employees. _____F_____Issued stock for cash. ____I______Sold equipment for cash. ____N______Purchased land in exchange for a note payable. _____F_____Paid cash dividends. _____I_____Received interest from an investment in the bonds of another corporation. _____I_____Purchase of land for cash, ____F______Signed a note payable in exchange for cash. ______N____Purchased a building in exchange for common stock. _____F_____Purchased treasury stock. ______O____Paid interest on a note payable. _____O_____Paid cash to settle an accounts payable balance.

2. The following income statement and information about selected current assets and current liabilities is available for Peters Company: Peters Company Income Statement For the Year Ended December 31, 2017 Sales…………………………………………………….. $180,000 Cost of goods sold………………………………………. 104,000 Gross profit from sales…………………………………… $ 76,000 Operating expenses: Salaries and wages expense………………………… $25,000 Depreciation expense……………………………….. 5,000 Rent expense…………………………………............ 7,200 Insurance expense…………………………………… 1,900 39,100 Income from operations…………………………………. $ 36,900 Gain on sale of land……………………………………… 2,000 Net income……………………………………………….. $ 38,900 December 31, 2017 Accounts receivable…………………… Prepaid expenses………………………. Merchandise inventory………………… Accounts payable………………………. Salaries payable………………………… Income taxes payable……………………

$27,600 550 18,200 27,100 10,400 300

December 31, 2016 $24,000 400 20,000 31,000 9,000 250

Required: Use the above information to calculate the net cash provided or used by operating activities using the indirect method. Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to net Cash Provided by Operating Activities Increase in Accounts Receivable Decrease in merchandise Inventory Increase in Prepaid Rent Decrease In Accounts Payable Increase in salaries and wages payable Increase in Interest Payable Depreciation expense Gain on sale of Land Net Cash Provided by operating activities

$38,900

(3,600) 1,800 (150) (3,900) 1400 50 5,000 (2000) $37,500

3. The following information is available for Tara Corporation: (a) Equipment with a book value of $125,000 and an original cost of $220,000 was sold at a gain of $22,000. (b) Paid $49,000 cash to purchase a new truck. (c) Sold land costing $30,000 for $26,000, resulting in a $4,000 loss. (d) Purchased treasury stock for $53,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, resulting in a $3,500 gain. Required: Use the above information to calculate the net cash provided or used by investing activities.

Net cash = 125000 + 22000 - 49000 + 26000 + 41000= 165000

4. The following information is available for Jackson Corporation: (a) Net income for the year was $10,000. (b) Sold common stock for $4,000 cash. (c) Paid cash dividends of $3,000. (d) Paid $8,000 cash to redeem bonds payable. (e) Purchased equipment for $12,000 cash. Required: Use the above information to calculate the net cash provided or used by financing activities.

Cash flows from financing activities Cash received from issuance of common stock

$4,000

Paid cash dividend

($3,000)

Redeem bonds payable

($8,000)

Net cash used in financing activities

($7,000)

5. The comparative balance sheets for Kohl Company appear below: Kohl Company Comparative Balance Sheet December 31, 2017 Assets Cash Accounts Receivable Prepaid Expenses Inventory Land Equipment Accumulated Depreciation – Equipment Total Assets Liabilities and Stockholders’ Equity Accounts Payable Bonds Payable Common Stock Retained Earnings Total Liabilities and Stockholders’ Equity

December 31, 2016

$27,000 18,000 6,000 27,000 -062,000 (20,000) $120,000

$12,000 14,000 9,000 18,000 18,000 30,000 (14,000) $87,000

$19,000 35,000 40,000 26,000 $120,000

$ 9,000 43,000 25,000 10,000 $87,000

Additional information: 1. Net income for the year ending December 31, 2017 was $40,000. 2. Cash dividends of $24,000 were declared and paid during the year. 3. Land that had a cost of $18,000 was sold for 14,000, resulting in a $4,000 loss. Required: Prepare a statement of cash flows for the year ended December 31, 2017, using the indirect method.



Statement of cash flow

Cash from operating activities Net income for the year

40,000

Adjustments to reconcile net income Depreciation expense

6,000

Loss on sale of land

4,000

increase in accounts recievable

-4,000

increase in inventory

-9,000

Decrease in prepaid expense

3,000

increase in accounts payable

10,000

Cash from operating activities

50,000

Cash from investing activities Cash from sale of land

14,000

purchase of Equipment

-32,000

Cash used by investing activities

-18,000

Cash from financing activities Redemption of bonds

-8,000

cash from common stock issue

15,000

Cash dividend paid

-24,000

Cash used by financing activities

-17,000

Net increase in cash

15,000

Cash at the beginning of the yea r

12,000

Cash at the end

27,000...