The comparative balance sheet for an enterprise that had profit of US $150, 000 for the year ended December 31, Year 2, and paid US $125, 000 of dividends during Year 2 is as follows:If dividends paid are treated as a cost of obtaining financial resources, the amount of net cash from operating activities during Year 2 was
Answer(s): B
Profit is adjusted to determine the net cash from operations. The payment of cash dividends is regarded as a cash flow from financing activity. Hence it is not a reconciling item. However, the decrease accounts receivable [US $200, 000 $200, 000) = US $20, 000) during the period represents a cash flowcollections of pre-year 2 receivables) not reflected in Year 2 profit. Moreover the decrease in liabilities) that also is not reflected in Year 2 net income Accordingly, net cash from operations was US $900, 000$150, 000 + $20, 000 $80, 000).
A corporation reported salaries expense of US $190, 000 for December of the current year. The following data are from its records:The amount of cash payments for salaries during December of the current year was
An increase in prepaid salaries indicates that salaries expense is less than the cash paid for salaries. An increase in salaries payable indicates that salaries expense is more than the cash paid for salaries. Thus, the amount of cash payments for salaries was US $166.000$190, 000 salaries expense + $6, 000 increase in prepaid salaries - $30, 000 increase in salaries payable).
In reconciling profit on an accrual basis to net cash from operating activities, what adjustment is needed to profit because of1) an increase during the period in prepaid expenses and2) the periodic amortization of premium on bonds payable?
Answer(s): D
An increase in prepaid expenses indicates that cash outlays for expenses exceeded the related expense incurred, thus, profit exceeded net cash from operating activities, and a deduction is needed in the reconciliation. Also, the amortization of premium on bonds payable causes a reduction of interest expense but does not increase cash; therefore, profit exceed net cash from operating activities, and a deduction is needed in the reconciliation. Balance sheets on December 31. Year 1. and December 31. Year 2, are presented below
Cost of goods sold in Year 2 was
Answer(s): A
Cost of goods sold equals beginning inventory, plus purchases, minus ending inventory. To determine cost of goods purchases must be calculated. Purchases equal US $167, 000$49, 000 ending accounts payable + $ 130, 000 payments to suppliers - $62, 000 beginning accounts payable). Thus, cost of goods sold equals US $ 147, 000$120, 000 beginning inventory + $167, 000 purchases - $140, 000 ending inventory). Balance sheets on December 31. Year 1. and December 31. Year 2, are presented below
Cash collections from customers in Year 2 were
Cash collections from customers equals beginning accounts receivable, plus sales revenue, minus accounts written off, minus ending accounts receivable. In Year 2. cash collections from customers were US $341.000$95, 000 + $338, 000 - $3, 000 - $89, 000). Balance sheets on December 31. Year 1. and December 31. Year 2, are presented below
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