Tracy company reports the following in its statement of cash flows:Net Income $1,000Depreciation and Amortization 350Decrease (Increase) in Accounts receivable (10)Decrease (increase) in inventory 200Decrease (increase) in prepaid expenses 80Increase (decrease) in trade payables (300)Increase (decrease) in taxes payable 75Cash Flow from operations 1,395If Tracy shows cost of goods sold of $2,050 on its income statement, cash paid to suppliers is
Answer(s): D
$2,050 - $200 (purchased $200 less than used) + 300 (paid more to suppliers.
Which of the following statements about the cash flow statement is/are true?
Answer(s): B
The cash flow statement cannot be manipulated as easily as the income statement since it is based on actual cash flows while income statement has to follow the accrual principle, which allocates non-cash expenses and revenues to the current and future periods, leaving open the avenue for earnings manipulation. For this reason, the cash flow statement acts as a check on the income statement.
On Jan. 1, DataCom prepays $3,000 rent for Mar. 1, June 1, and Sept.1. Under accrual basis accounting, what is the impact on the Feb. financial statements?
In order to match expenses with revenues for the period, the cost of prepaid insurance should be allocated to each accounting period. The asset value is decreased (credit), and an expense is recognized (debit), thus decreasing net income.
Stockholders' Equity is
Answer(s): C
The accounting equation shows us that the Assets (Own) are equal to the Liabilities (obligations) plus the Stockholders' Equity.
If a firm recognizes expenses before that dictated by accrual accounting, which of the following best describes the effects on income, total assets and retained earnings?Income Total Assets Retained Earnings
Income is understated. Hence, retained earnings and equity are understated. Hence, assets are understated.
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