Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 2, Problem 7YT
To determine
Identify the reason behind the difference between the amount reported in the income statement as revenue and the amount reported in the statement of
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Suppose your company sells goods for $450, of which $275 is received in cash and $175 is on account. The goods cost your company $155 and were paid for in a previous period. Your company also recorded salaries and wages of $145, of which only $45 has been paid in cash.
How would i answer the following questions??
Calculate the amount that should be reported as net cash flow from operating activities.
Calculate the amount that should be reported as net income.
Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).
Suppose your company sells services of $180 in exchange for $110 cash and $70 on account.Required:1. Show the journal entry to record this transaction.2. Identify the amount that should be reported as net cash flow from operating activities.3. Identify the amount that would be included in net income.4. Show how the indirect method would convert net income (requirement 3) to net cash flowfrom operating activities (requirement 2).5. What general rule about converting net income to operating cash flows is revealed by youranswer to requirement 4?
Suppose your company sells goods for $300, of which $200 is received in cash and $100 is onaccount. The goods cost your company $125 and were paid for in a previous period. Your companyalso recorded salaries and wages of $70, of which only $30 has been paid in cash.Required:1. Show the journal entries to record these transactions.2. Calculate the amount that should be reported as net cash flow from operating activities.3. Calculate the amount that should be reported as net income.4. Show how the indirect method would convert net income (requirement 3) to net cash flowfrom operating activities (requirement 2).5. What general rule about converting net income to operating cash flows is revealed by youranswer to requirement 4?
Chapter 2 Solutions
Financial Accounting
Ch. 2 - Prob. 1YTCh. 2 - Prob. 2YTCh. 2 - Is prepaid insurance an expense or an asset?...Ch. 2 - Prob. 4YTCh. 2 - Give an example of the matching principle from the...Ch. 2 - What is the difference between cash basis and...Ch. 2 - Prob. 7YTCh. 2 - What is GAAP? What is IFRS?Ch. 2 - Prob. 2QCh. 2 - Prob. 3Q
Ch. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - What are the four basic financial statements?Ch. 2 - Which financial statement pertains to a single...Ch. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10QCh. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - What does recognize revenue mean in accounting?Ch. 2 - Prob. 14QCh. 2 - What is an accrual? What is a deferral?Ch. 2 - Must a company collect the money from a sale...Ch. 2 - What is the cost of goods sold?Ch. 2 - Explain the difference between cash basis...Ch. 2 - Prob. 19QCh. 2 - Prob. 20QCh. 2 - Prob. 21QCh. 2 - Prob. 1MCQCh. 2 - Prob. 2MCQCh. 2 - Prob. 3MCQCh. 2 - Prob. 4MCQCh. 2 - Prob. 5MCQCh. 2 - Prob. 6MCQCh. 2 - Prob. 7MCQCh. 2 - Prob. 8MCQCh. 2 - Prob. 9MCQCh. 2 - Prob. 10MCQCh. 2 - Elements of the financial statements. (LO 3). For...Ch. 2 - Prob. 2SEACh. 2 - Prob. 3SEACh. 2 - Prob. 4SEACh. 2 - Prob. 5SEACh. 2 - Prob. 6SEACh. 2 - Cash versus credit sales. (LO 3, 4). Company A had...Ch. 2 - Prob. 8SEACh. 2 - Prob. 9SEACh. 2 - Prob. 10SEACh. 2 - Prob. 11SEBCh. 2 - Prob. 12SEBCh. 2 - Prob. 13SEBCh. 2 - Prob. 14SEBCh. 2 - Prob. 15SEBCh. 2 - Prob. 16SEBCh. 2 - Prob. 17SEBCh. 2 - Prob. 18SEBCh. 2 - Prob. 19SEBCh. 2 - Prob. 20SEBCh. 2 - Prob. 21EACh. 2 - Prob. 22EACh. 2 - Prob. 23EACh. 2 - Balance sheet and income statement transactions....Ch. 2 - Prob. 25EACh. 2 - Prob. 26EACh. 2 - Prob. 27EACh. 2 - Prob. 28EACh. 2 - Elements of the financial statements. (LO 3). The...Ch. 2 - Prob. 30EBCh. 2 - Elements of the financial statements. (LO 3)....Ch. 2 - Prob. 32EBCh. 2 - Prob. 33EBCh. 2 - Prob. 34EBCh. 2 - Prob. 35EBCh. 2 - Current ratio. (LO 5). The following data was...Ch. 2 - Prob. 37PACh. 2 - Prob. 38PACh. 2 - Prob. 39PACh. 2 - Prob. 40PACh. 2 - Prob. 41PACh. 2 - Prob. 42PBCh. 2 - Prob. 43PBCh. 2 - Prob. 44PBCh. 2 - Prob. 45PBCh. 2 - Prob. 46PBCh. 2 - Prob. 1FSACh. 2 - Prob. 2FSACh. 2 - Prob. 3FSA
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- What are two ways to report a companys net cash flow from operating activities? Briefly describe each method.arrow_forwardSuppose your company sells services of $180 in exchange for $110 cash and $70 on account. prepare journal entry a) Record the service revenue of $110 for cash and $70 on account. dentify the amount that should be reported as net cash flow from operating activities. Identify the amount that would be included in net income. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).arrow_forwardSuppose your company sells services of $180 in exchange for $110 cash and $70 on account. Required: 1. Prepare the journal entry to record this transaction. 2. Identify the amount that should be reported as net cash flow from operating activities. 3. Identify the amount that would be included in net income. 4. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2). (Amounts to be deducted should be indicated with a minus sign.) Net Income Increase in Accounts Receivable Net Cash Flow from Operating Activitiesarrow_forward
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- An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest, and taxes and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indication? B . Th is ratio is an eff ective tax ratio, measuring the amount of a company’s operating cash fl ow used for taxes and indicating a company’s effi ciency in tax management.arrow_forwardPrepare the statement of cash flows for Dux Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 10,000 should be entered as 10).)arrow_forwardSuppose your company sells services of $270 in exchange for $155 cash and $115 on account. Required: Prepare the journal entry to record this transaction. Identify the amount that should be reported as net cash flow from operating activities. Identify the amount that would be included in net income. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2). I have no clue how to work this problemarrow_forward
- The cash flows from (used for) operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $558,800 and accounts receivable decreased by $39,700 during the year, what was the amount of cash received from customers?$fill in the blank 1 b. If income tax expense for the current year was $38,900 and income tax payable decreased by $4,500 during the year, what was the amount of cash paid for income taxes?$fill in the blank 2 c. Briefly explain why the cash received from customers in part (a) is different from sales.Because the customers paid than the amount of sales for the period, cash received from customers sales made on account by $39,700 during the current year.arrow_forward! Required information [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2. January 1 April 1 700 units @ $31 2,600 units @ $36 900 units @ $39 October 1 Beginning Inventory Purchased Purchased During Year 2, Parvin sold 3,900 units of inventory at $85 per unit and incurred $44,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $81,000, inventory of $21,700, common stock of $56,000, and retained earnings of $46,700. d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)arrow_forward10 Suppose your company sells services of $310 in exchange for $175 cash and $135 on account. Required: 1. Prepare the journal entry to record this transaction. 2. Identify the amount that should be reported as net cash flow from operating activities. 3. Identify the amount that would be included in net income. 4. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Prepare the journal entry to record this transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the service revenue of $175 for cash and $135 on account. Note Enter debits before credits Transaction General Journal Debit Creditarrow_forward
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