1. Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected fromcustomers, $370,000; Cash paid for rent, $46,000; Cash paid to employees for services rendered during the year, $126,000; Cashpaid for utilities, $56,000.In addition, you determine that customers owed the company $66,000 at the end of the year and no bad debts were anticipated. Also,the company owed the gas and electric company $2,600 at year-end, and the rent payment was for a two-year period.Calculate accrual net income for the year.Net income

Accrual net income will be calculated by accrual of net income minus accrual of total expesne.

Answered: Cash flows during the first year of…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 43E

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Discuss how each of the following transactions for Watson, International, will affect assets, liabilities, and stockholders equity, and prove the companys accounts will still be in balance. A. An investor invests an additional $25,000 into a company receiving stock in exchange. B. Services are performed for customers for a total of $4,500. Sixty percent was paid in cash, and the remaining customers asked to be billed. C. An electric bill was received for $35. Payment is due in thirty days. D. Part-time workers earned $750 and were paid. E. The electric bill in C is paid.
Analyzing Transactions. Using the analytical framework, indicate the effect of the following related transactions of a firm. a. January 1: Issued 10,000 shares of common stock for 50,000. b. January 1: Acquired a building costing 35,000, paying 5,000 in cash and borrowing the remainder from a bank. c. During the year: Acquired inventory costing 40,000 on account from various suppliers. d. During the year: Sold inventory costing 30,000 for 65,000 on account. e. During the year: Paid employees 15,000 as compensation for services rendered during the year. f. During the year: Collected 45,000 from customers related to sales on account. g. During the year: Paid merchandise suppliers 28,000 related to purchases on account. h. December 31: Recognized depreciation on the building of 7,000 for financial reporting. Depreciation expense for income tax purposes was 10,000. i. December 31: Recognized compensation for services rendered during the last week in December but not paid by year-end of 4,000. j. December 31: Recognized and paid interest on the bank loan in Part b of 2,400 for the year. k. Recognized income taxes on the net effect of the preceding transactions at an income tax rate of 40%. Assume that the firm pays cash immediately for any taxes currently due to the government.
Comparing the Income Statement and the Statement of Cash Flows On January 1, Campus Internet Connection opened for business across the street from Upper Eastern University. The company charges students a monthly fee of $20 and $1 for each hour they are online. During January, 500 students signed up for the service, and each will have until the fifth of the following month to pay the monthly fee. By the end of January, 200 students had paid the monthly fee. Student usage, payable at the time connected, was 3,000 hours during January. Assume that Campus uses the accrual basis of accounting. Required Prepare the Revenues section of Campuss income statement for the month of January. Prepare the Cash Receipts section of Campuss statement of cash flows for the month of January. In addition to the Cash account, what other account will appear on Campuss balance sheet at the end of January? What amount will be in this account?
Statement of Cash Flows Colorado Corporation was organized at the beginning of the year, with the investment of $250,000 in cash by its stockholders. The company immediately purchased an office building for $300,000, paying $210,000 in cash and signing a three-year promissory note for the balance. Colorado signed a five-year, $60,000 promissory note at a local bank during the year and received cash in the same amount. During its first year, Colorado collected $93,970 from its customers. It paid $65,600 for inventory, $20,400 in salaries and wages, and another $3,100 in taxes. Colorado paid $5,600 in cash dividends. Required Prepare a statement of cash flows for the year. What does this statement tell you that an income statement does not?
Determine the following amounts: a. The amount of the liabilities of a business that has 60,800 in assets and in which the owner has 34,500 equity. b. The equity of the owner of a tour bus that cost 57,000 and on which is owed 21,800 on an installment loan payable to the bank. c. The amount of the assets of a business that has 11,780 in liabilities and in which the owner has 28,500 equity.
What accounting method (cash or accrual) would you recommend for the following businesses? a. A gift shop with average annual gross receipts of 900,000. b. An accounting partnership with average annual gross receipts of 12 million. c. A drywall subcontractor who works on residences and has annual gross receipts of 3 million. d. An incorporated insurance agency with average annual gross receipts of 28 million. e. A sole proprietor operating a retail clothing store with average annual gross receipts of 12 million. f. A sole proprietor operating a widget manufacturing plant with average annual gross receipts of 27 million.

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