Assume that Company A purchased $1,000 of inventory on account (i.e. on credit)from Company B. What impact will Company A's picking up of the inventory haveon Company A's income statement, balance sheet, and statement of cash flows?income statement (reduce income), balance sheet (assets increase, liabilities increase,equity no effect) and statement of cash flows (no effect)O income statement (reduce income), balance sheet (increase assets, liabilities increase,equity decrease) and statement of cash flows (no effect)income statement (decrease income), balance sheet (assets increase, liabilities increase,equity decrease) and statement of cash flows (decrease cash on hand)income statement (no effect), balance sheet (assets increase, liabilities increase, equity noeffect) and statement of cash flows (no effect)

The accounting equation says that every transaction has multiple effects. Some account increases and…

Answered: Assume that Company A purchased $1,000…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 4E

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Similar questions

Assume a company has a $350 credit (not cash) sale. How would the transaction appear if the business uses accrual accounting? A. $350 would show up on the balance sheet as a sale. B. $350 would show up on the income statement as a sale. C. $350 would show up on the statement of cash flows as a cash outflow. D. The transaction would not be reported because the cash was not exchanged.
Jarem Company showed 189,000 in prepaid rent on December 31, 20X1. On December 31, 20X2, the balance in the prepaid rent account was 226,800. Rent expense for 20X2 was 472,500. Required: 1. What amount of cash was paid for rent in 20X2? 2. CONCEPTUAL CONNECTION What adjustment in prepaid expenses is needed if the indirect method is used to prepare Jarems statement of cash flows?
Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:a. Increase in merchandise inventoryb. Increase in prepaid expensesc. Depreciation of fixed assetsd. Gain on disposal of fixed assetse. Amortization of patentf. Increase in notes payable due in 120 days to vendorsg. Increase in accounts payableh. Decrease in wages payablei. Decrease in notes receivable due in 60 days from customersj. Decrease in accounts receivablek. Loss on retirement of long-term debt
Using the Exhibit below, assume that the balance of Merchandise Inventory was $170,000 at the beginning of the current year. Furthermore, assume that the balance of Merchandise Inventory is $150,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of merchandise inventory on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX…
Milo Clothing experienced the following events during Year 1, its first year of operation: Acquired $19,500 cash from the issue of common stock. Purchased inventory for $6,300 cash. Sold inventory costing $3,780 for $6,426 cash. Paid $600 for advertising expense. Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.)
Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. Cash Net Income (a) Purchased $100 of supplies for cash. − $100 $ 0 (b) Received $800 from customers in payment of their accounts. (c) Made sales of $1,300, all on account. (d) Recorded an adjustment to record use of $20 of the above supplies. (e) Purchased equipment for cash, $2,500. (f) Recorded depreciation of building for period used, $600.
If a company purchases inventory with cash, does the total asset balance change ? Explain briefly.

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