Cash Flows

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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…show more content…
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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