Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 7, Problem 26P

a.

To determine

Record the events in the accounting equation to identify the effects of transactions.

a.

Expert Solution
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Explanation of Solution

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below.

Assets = Liabilities + Stockholders' Equity

Record the events in accounting equation:

Survey Of Accounting, Chapter 7, Problem 26P

Table (1)

Working note 1: Calculate the amount of Accrued interest for 2014:

Accrued interest=Notes payable×Interest rate×Number of monthsMonths in a year=$20,000×8%×912(April to December)=$1,200

Working note 2: Calculate the amount of Accrued interest for 2015:

Accrued interest=Notes payable×Interest rate×Number of monthsMonths in a year=$20,000×8%×312(January to March)=$400

b.

To determine

Identify the amount of net cash flow from operating activities that would be reported on the 2014 cash flow statement.

b.

Expert Solution
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Explanation of Solution

Cash flows from operating activities refer to the cash received or cash paid in day-to-day operating activities of a company.

Calculate the cash flow from operating activities:

Corporation I
Statement of cash flow
ParticularsAmount ($)Amount ($)
Cash flow from operating activities 
Cash collected from revenue$46,000 
Cash paid for operating expenses($27,000) 
Net cash flow from operating activities $19,000

Table (2)

Thus, the cash flow operating activities is $19,000 is the amount that would be reported on the statement of cash flows.

c.

To determine

Identify the amount of interest expense that would be reported on the 2014 income statement.

c.

Expert Solution
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Explanation of Solution

Interest expense refers to the cost of debt which is incurred during a particular accounting period. The interest amount is a fixed interest rate payable on the principal amount of debt.

The amount of interest expense that would be reported on the 2014 income statement is $1,200 (1).

Thus, the interest expense is $1,200 the amount that would be reported on the income statement.

d.

To determine

Identify the amount of total liabilities that would be reported on the 2014 balance sheet.

d.

Expert Solution
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Explanation of Solution

Total liabilities are the sum of financial obligations and debt owed by business.

Calculate the total liabilities:

ParticularsAmount ($)Amount ($)
Notes payable20,000
Interest payable1,200
Total liabilities 21,200

Table (3)

Thus, the amount of total liabilities that would be reported on the 2014 balance sheet is $21,200.

e.

To determine

Identify the amount of retained earnings that would be reported on the 2014 balance sheet.

e.

Expert Solution
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Explanation of Solution

Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.

The amount of retained earnings that would be reported on the 2014 balance sheet is $25,800.

f.

To determine

Identify the amount net cash flow from financing activities that would be reported on the 2014 statement of cash flows.

f.

Expert Solution
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Explanation of Solution

Cash flow from financing activities:

This section of cash flows statement provides information about the cash inflow and outflow as a result of issuance and financing of debt, issue of new stock and payment of dividends.

Compute the cash from operating activities:

Corporation I
Statement of cash flow
ParticularsAmount ($)Amount ($)
Cash flow from financing activities 
Loan borrowed$20,000 
Net cash flow from operating activities $20,000

Table (4)

Thus, the amount of cash flow from financing activities that would be reported on the statement of cash flow is $20,000.

g.

To determine

Identify the amount of interest expense that would be reported on the 2015 income statement.

g.

Expert Solution
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Explanation of Solution

Interest expense refers to the cost of debt which is incurred during a particular accounting period. The interest amount is a fixed interest rate payable on the principal amount of debt.

The amount of interest expense that would be reported on the 2015 income statement is $400 (2).

h.

To determine

Identify the amount of net cash flow from operating activities that would be reported on the 2015 Statement of cash flows.

h.

Expert Solution
Check Mark

Explanation of Solution

Cash flows from operating activities refer to the cash received or cash paid in day-to-day operating activities of a company.

Calculate the cash flow from operating activities:

Corporation I
Statement of cash flow
ParticularsAmount ($)Amount ($)
Cash flow from operating activities 
Cash collected from accounts receivable$63,000 
Cash paid for operating expenses($36,000) 
Cash paid for interest($1,600) 
Net cash flow from operating activities $25,400

Table (5)

Thus, the cash flow operating activities that would be reported on the statement of cash flows is $25,400.

i.

To determine

Identify the amount of total assets that would be reported on the 2015 balance sheet.

i.

Expert Solution
Check Mark

Explanation of Solution

Calculate the total assets:

ParticularsAmount ($)Amount ($)
Cash44,400
Accounts receivable10,000
Total liabilities 54,400

Table (6)

Thus, the amount of total assets that would be reported on the 2015 balance sheet is $54,400

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Chapter 7 Solutions

Survey Of Accounting

Ch. 7 - 11. Are contingent liabilities recorded on a...Ch. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 14QCh. 7 - Prob. 15QCh. 7 - Prob. 16QCh. 7 - 1. What is the difference between classification...Ch. 7 - 2. At the beginning of Year 1, B Co. has a note...Ch. 7 - 3. What is the purpose of a line of credit for a...Ch. 7 - 4. What are the primary sources of debt financing...Ch. 7 - 5. What are some advantages of issuing bonds...Ch. 7 - 6. What are some disadvantages of issuing bonds?Ch. 7 - 7. Why can a company usually issue bonds at a...Ch. 7 - 15. If Roc Co. issued 100,000 of 5 percent,...Ch. 7 - 16. What is the mechanism is used to adjust the...Ch. 7 - 17. When the effective interest rate is higher...Ch. 7 - 18. What type of transaction is the issuance of...Ch. 7 - 19. What factors may cause the effective interest...Ch. 7 - 20. If a bond is selling at 97, how much cash will...Ch. 7 - Prob. 30QCh. 7 - 22. Gay Co. has a balance m the Bonds Payable...Ch. 7 - Prob. 32QCh. 7 - Prob. 33QCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 19ECh. 7 - Prob. 20ECh. 7 - Prob. 21ECh. 7 - Prob. 22ECh. 7 - Prob. 23ECh. 7 - Prob. 24ECh. 7 - Prob. 25ECh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 1ATCCh. 7 - Prob. 4ATCCh. 7 - Prob. 5ATC
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