Classifications of Cash Flows – A company’s statement of cash flows and the accompanying schedule of investing and financing activities not affecting cash may contain the following major sections: A. Net Cash Flow From Operating Activities B. Cash Flows From Investing Activities C. Cash Flows From Financing Activities D. Investing and Financing Activities Not Affecting Cash The following is a list of items that might […]

The cumulative effect of an accounting change on the amount of retained earnings at the beginning of the period in which the change is made should generally be included in the retained earnings statement for the period of the change for a Change in Accounting Principle Change in Accounting Estimate Yes Yes No Yes Yes No No No

Net Cash Flow From Operating Activities – The following is accounting information taken from the Verna Company’s records for 2007: 1. Decrease in accounts payable, $4,600 2. Loss on sale of land, $1,900 3. Increase in inventory, $7,800 4. Increase in income taxes payable, $2,700 5. Net income, $68,400 6. Patent amortization expense, $1,600 7. Extraordinary loss (net), $6,200 8. Decrease in deferred taxes payable, […]

On January 1, 2007 Belmont Company changed its inventory cost flow method to the FIFO cost method from the LIFO cost method. Belmont can justify the change, which was made for both financial statement and income tax reporting purposes. Belmont’s inventories aggregated $4,000,000 on the LIFO basis at December 31, 2006. Supplementary records maintained by Belmont showed that the inventories would have totaled $4,800,000 at […]

Statement of Cash Flows – The following is a list of the items to be included in the preparation of the 2007 statement of cash flows for the Warrick Company: 1. Net income, $59,200 2. Payment for purchase of building, $98,000 3. Increase in accounts receivable, $7,400 4. Proceeds from issuance of common stock, $37,100 5. Increase in accounts payable, $4,500 6. Proceeds from sale […]

Generally, how should a change in accounting principle that is affected by a change in accounting estimate be reported? Change in Accounting Estimate Change in Accounting Principle No No Yes Yes No Yes Yes No

Statement of Cash Flows – The following is a list of the items to be included in the preparation of the 2007 statement of cash flows for the Trone Company: 1. Extraordinary gain (net), $9,200 2. Proceeds from issuance of note, $25,000 3. Decrease in accounts receivable, $5,000 4. Payment for purchase of patent, $19,800 5. Increase in inventory, $6,700 6. Payment of dividends, $30,000 […]

Identification and Effects of Changes and Errors – The following are several independent events: 1. Change from the FIFO to the LIFO inventory cost flow assumption. 2. Write-off of patent due to the introduction of a competing product. 3. Payment to the Internal Revenue Service in settlement of a dispute over previous year’s taxes. 4. Increase in allowance for uncollectible accounts from 2% to 4% […]

Infrequent Transactions – The following transactions were recorded on the books of the Baxter Company during the current year. The company: 1. Issued a “small” common stock dividend of 400 shares. The par value is $10 per share and the relevant market price was $20 per share. 2. Exchanged equipment with a cost of $10,000 and a book value of $3,800 for land valued at […]

Worksheet (Spreadsheet) and Statement of Cash Flows – The following information was taken from the accounting records of the Lamberson Company: Account Balances Debits 1-Jan-07 31-Dec-07 Cash $1,400 $2,400 Accounts receivable (net) 2,800 2,690 Marketable securities (at cost) 1,700 3,000 Allowance for change in value 500 800 Inventories 8,100 7,910 Prepaid items 1,300 1,710 Investments (long-term) 7,000 5,400 Land 15,000 15,000 Buildings and equipment 32,000 […]