Exam 4: Structure of the Balance Sheet and Statement of Cash Flows

Investing activities include the cash effects of selling stocks and bonds to raise capital to purchase fixed assets.

Liabilities are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

Selected data for Kris Corporation's comparative balance sheets for Year 1 and Year 2 are as follows: Assets Year 1 Year 2 Cash \ 100,000 (\ 50,000) Accounts receivable (net) 50,000 100,000 Inventory 100,000 250,000 Equipment (net) \ 300,000 Total assets \ 550,000 \ 650,000 Liabilities and Equity Accounts payable \ 150,000 \ 100,000 Income taxes payable 80,000 30,000 Bonds payable 100,000 80,000 Common stock 100,000 200,000 Retained earnings 120,000 240,000 Total liabilities and Equity \ 550,000 \ 650,000 A brief income statement for Year 2 shows the following: Sales \9 00,000 Cost of goods sold \ 500,000 Operating expenses 100,000 Depreciation 50,000 Income tax expense 100,000 750,000 Net Income \1 50,000 -How much did Kris pay in income taxes to the government in Year 2?

The change in cash during a period is equal to the net income for the period.

What indication for the following firm behavior can be found in the statement of cash flows? a.Difficulties in cash collections b.Decrease in investments in long term assets

The residual interest in the resources of an entity that remains after deducting its debts to third parties defines

Events that occur after the financial statements are issued are referred to as subsequent events.

The Barden Company provides the following information from its Year 3 and Year 4 balance sheets: Year 3 Year 4 Accounts receivable \ 115,000 \ 97,500 Inventory 120,000 130,000 Prepaid insurance 7,500 1,500 Prepaid rent 40,000 15,000 Accounts payable 55,000 65,000 The following information is available from the Year 4 income statement: Sales \ 425,000 Cost of goods sold 225,000 Insurance expense 12,000 Rent expense 25,000 -Assuming that the information provided from the income statement represents all of the pre-tax income of Barden Company,what is the difference between the accrual-basis and cash-basis income in Year 4?

The change in a firm's cash position between successive balance sheet dates will not equal the reported income for that period for all of the following reasons except:

Current liabilities are reported on the balance sheet at

It is permissible for a firm that reports in accordance with IFRS to emphasize its liquidity by placing current assets and current liabilities in close proximity to one another on the balance sheet.

On a common-size balance sheet,each balance sheet account is expressed as a percentage of net assets.

Inventories are reported on the balance sheet at historical cost.

Selected data for Kris Corporation's comparative balance sheets for Year 1 and Year 2 are as follows: Assets Year 1 Year 2 Cash \ 100,000 (\ 50,000) Accounts receivable (net) 50,000 100,000 Inventory 100,000 250,000 Equipment (net) \ 300,000 Total assets \ 550,000 \ 650,000 Liabilities and Equity Accounts payable \ 150,000 \ 100,000 Income taxes payable 80,000 30,000 Bonds payable 100,000 80,000 Common stock 100,000 200,000 Retained earnings 120,000 240,000 Total liabilities and Equity \ 550,000 \ 650,000 A brief income statement for Year 2 shows the following: Sales \9 00,000 Cost of goods sold \ 500,000 Operating expenses 100,000 Depreciation 50,000 Income tax expense 100,000 750,000 Net Income \1 50,000 -How much cash did Kris pay to suppliers for inventory during Year 2? Assume all purchases are on credit.

The unpaid amount of income taxes due to the government for a given year are found on the

An important decision in corporate finance is determining the proper mix of debt and equity financing.

Harry's Clothing Inc.,used the following headings on the company's December 31,2014 balance sheet: (A)Current assets (B)Long-term investments (C)Property and equipment (D)Intangible assets (E)Other assets (F)Current liabilities (G)Long-term debt (H)Shareholders' equity For each of the following items,indicate its normal balance sheet classification category.Use (NA)for items that would not appear on the face of the balance sheet,but would be discussed in the notes to the financial statements. _____ 1.Accounts receivable _____ 2.Accrued interest on notes payable (2015 maturity) _____ 3.Accumulated depreciation _____ 4.Goodwill _____ 5.Preferred stock _____ 6.Common stock _____ 7.Customer deposits on products to be shipped in a few months _____ 8.Depreciation methods and estimated lives of equipment _____ 9.Prepaid insurance _____ 10.Assets (surplus production equipment)held for sale

A related party transaction occurs when a company enters into a transaction with individuals or other companies that are connected in some way with it or its management.

Under U.S.GAAP,cash interest from investments is reported on the statement of cash flows as part of investing activities whereas under IFRS,cash interest from investments is reported as part of financing activities.

Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events define