Cash Flows

968 Words Sep 19th, 2014 4 Pages
Cash Flows
Aleshia Wisch
ACC206: Principles of Accounting II
Prof. Eric Sumners
August 11, 2014
ACC 206 Week Assignment

1. Critical Thinking Question:
Answer the following questions:
Why are noncash transactions, such as the exchange of common stock for a building for example, included on a statement of cash flows? How are these noncash transactions disclosed?
It is important for a company to show what assets they have on hand that can convert to cash. Non cash transactions are disclosed in the footnotes of the financial statement of cash flows. “…a company may exchange common stock for land. Such transactions do not trigger a direct inflow or outflow of cash, but they are nonetheless highly significant
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The $9,000 loss would be added back to the net income under Operating Activities.

5. Cash flow information: Direct and indirect methods
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company 's current accounts:

20X5
20X4
Increase / Decrease)
Current assets

Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
-4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200

Current liabilities

Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
-5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
-21,600
Note payable
44,000

44,000

The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm 's selling and administrative expenses. The company 's condensed income statement follows.

SIGN GRAPHICS INC.
Income Statement for the Year Ended December 31, 20x5

Sales

$713,800 Less: Cost of goods sold

323,000 Gross profit

$390,800

Less: Selling & administrative expenses

$186,000

Depreciation expense

17,000

Interest expense

27,000

230,000

Add: gain on sale of land

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