FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
W20 Edition
ISBN: 9780136615583
Author: REIMERS
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 7SEA
Cash versus credit sales. (LO 3, 4). Company A had sales of $1,500 during the year and collected them all in cash. Company B, on the other hand, had sales of $1,500 during the year but collected only $1,000 cash with the remaining $500 sales on account. Both firms had expenses of $700, all paid in cash by both firms. What was Company A’s net income for the year? What was Company B’s net income for the year? What was Company A’s net cash from operating activities during the year? What was Company B’s net cash from operating activities during the year?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
During the year, Al's Tools decreased its accounts receivable by $200, increased its inventory by $110, and decreased its accounts payable by $80. How did these three accounts affect the sources of/uses of cash by the firm?
A. Net source of cash of $120
B. Net source of cash of $205
C. Net source of cash of $10
D. Net use of cash of $115
Best Exports has noticed their current year net income is only $60,000. In order to get a loan from their bank to assist the business they will need to provide a statement of cash flows. In reviewing the statement of cash flows, you notice a large increase ($80,000) in accounts receivable due to two of your largest customers being behind in payments. Since the bank looks at the operating activities, this increase will create concern. You make a suggestion to reclassify the accounts receivables to long-term, thus removing them from current assets will increase the net cash from operations.
Under what circumstances would this reclassification be considered ethical or unethical? Support your selection by finding an article which explains your choice.
Your managers showed you the income statement for your company. The income statement shows a net income of 5.4%, yet your manager says the company will need to borrow money to meet their financial obligations.
How is this possible? Please address the following issues in your discussion this week:
How can a company make a profit and still be short of cash?
In accrual accounting, we record sales when they occur, not when the cash is collected. How does this affect cash flow?
How does the purchase of fixed assets or additional inventory adversely affect cash flow?
Chapter 2 Solutions
FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
Ch. 2 - Prob. 1YTCh. 2 - Prob. 2YTCh. 2 - Is prepaid insurance an expense or an asset?...Ch. 2 - Prob. 4YTCh. 2 - Give an example of the matching principle from the...Ch. 2 - What is the difference between cash basis and...Ch. 2 - Prob. 7YTCh. 2 - What is GAAP? What is IFRS?Ch. 2 - Prob. 2QCh. 2 - Prob. 3Q
Ch. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - What are the four basic financial statements?Ch. 2 - Which financial statement pertains to a single...Ch. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10QCh. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - What does recognize revenue mean in accounting?Ch. 2 - Prob. 14QCh. 2 - What is an accrual? What is a deferral?Ch. 2 - Must a company collect the money from a sale...Ch. 2 - What is the cost of goods sold?Ch. 2 - Explain the difference between cash basis...Ch. 2 - Prob. 19QCh. 2 - Prob. 20QCh. 2 - Prob. 21QCh. 2 - Prob. 1MCQCh. 2 - Prob. 2MCQCh. 2 - Prob. 3MCQCh. 2 - Prob. 4MCQCh. 2 - Prob. 5MCQCh. 2 - Prob. 6MCQCh. 2 - Prob. 7MCQCh. 2 - Prob. 8MCQCh. 2 - Prob. 9MCQCh. 2 - Prob. 10MCQCh. 2 - Elements of the financial statements. (LO 3). For...Ch. 2 - Prob. 2SEACh. 2 - Prob. 3SEACh. 2 - Prob. 4SEACh. 2 - Prob. 5SEACh. 2 - Prob. 6SEACh. 2 - Cash versus credit sales. (LO 3, 4). Company A had...Ch. 2 - Prob. 8SEACh. 2 - Prob. 9SEACh. 2 - Prob. 10SEACh. 2 - Prob. 11SEBCh. 2 - Prob. 12SEBCh. 2 - Prob. 13SEBCh. 2 - Prob. 14SEBCh. 2 - Prob. 15SEBCh. 2 - Prob. 16SEBCh. 2 - Prob. 17SEBCh. 2 - Prob. 18SEBCh. 2 - Prob. 19SEBCh. 2 - Prob. 20SEBCh. 2 - Prob. 21EACh. 2 - Prob. 22EACh. 2 - Prob. 23EACh. 2 - Balance sheet and income statement transactions....Ch. 2 - Prob. 25EACh. 2 - Prob. 26EACh. 2 - Prob. 27EACh. 2 - Prob. 28EACh. 2 - Elements of the financial statements. (LO 3). The...Ch. 2 - Prob. 30EBCh. 2 - Elements of the financial statements. (LO 3)....Ch. 2 - Prob. 32EBCh. 2 - Prob. 33EBCh. 2 - Prob. 34EBCh. 2 - Prob. 35EBCh. 2 - Current ratio. (LO 5). The following data was...Ch. 2 - Prob. 37PACh. 2 - Prob. 38PACh. 2 - Prob. 39PACh. 2 - Prob. 40PACh. 2 - Prob. 41PACh. 2 - Prob. 42PBCh. 2 - Prob. 43PBCh. 2 - Prob. 44PBCh. 2 - Prob. 45PBCh. 2 - Prob. 46PBCh. 2 - Prob. 1FSACh. 2 - Prob. 2FSACh. 2 - Prob. 3FSA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Suppose Columbia Sportswear Company had accounts receivable of $206,024,000 at the beginning of a recent year, and $267,653,000 at year-end. Sales revenue was $1,095,307,000 for the year.What is the amount of cash receipts from customers? what are the cash receipts from customers?arrow_forwardGolden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. GOLDEN CORPORATIONComparative Balance SheetsDecember 31 Current Year Prior Year Assets Cash $ 164,000 $ 107,000 Accounts receivable 83,000 71,000 Inventory 601,000 526,000 Total current assets 848,000 704,000 Equipment 335,000 299,000 Accum. depreciation—Equipment (158,000 ) (104,000 ) Total assets $ 1,025,000 $ 899,000 Liabilities and Equity…arrow_forwardBased on the following information, what is the amount of McKee Company’s income before income taxes, assuming the accrual method of accounting? Credit Sales totaled $320,000. Cash Sales totaled $414,000. Cash collected from customers for services not performed yet $93,000. Dividend Income $4,500. Cost of Goods Sold $336,000. Salaries Expense $50,000. Rent Expense $32,000. Other Operating Expenses $80,000. Interest Expense $21,000. Prepaid Rent $3,000. Gain on the sale of equipment $20,000. Group of answer choices $239,500 $332,500 $232,000 $236,000arrow_forward
- Suppose your company sells goods for $450, of which $275 is received in cash and $175 is on account. The goods cost your company $155 and were paid for in a previous period. Your company also recorded salaries and wages of $145, of which only $45 has been paid in cash. How would i answer the following questions?? Calculate the amount that should be reported as net cash flow from operating activities. Calculate the amount that should be reported as net income. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).arrow_forwardAt the beginning of the period, International Accounting Standards Board (Board) had a cash balance of P30,000 and a notes payable of P18,000. During the period, the business collected P12,000 accounts receivable, paid P10,000 notes payable, and issued additional notes payable of P3,000 in exchange for cash. How much is the ending balance of cash? show solutionarrow_forwardI am having trouble with this problem. The beginning-of-the-period cash balance for the Travis Company was a $7,200 debit. Cash sales for the month were $3,600 and sales on account were $4,800. The company paid $1,500 cash for current-period purchases and also paid $1,800 cash for amounts due from last month.What is the ending debit or credit balance in the Cash account?arrow_forward
- Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. Required:Prepare a complete statement of cash flows using a spreadsheet under the indirect method. (Enter all amounts as positive values.)arrow_forwardAt the beginning of the period, ABC Company have a cash balance of P5,500. During the period, the total cash collections amounts to P15,000 and payment of salaries worth P6,000 and Meralco bills worth P1,400 is made. Compute the ending balance of cash. On Jan. 31, Ronald Co.’s cash balance is P50,000. On Jan. 13, Ronald Company have purchases on cash worth P35,000. On Jan. 25, they have sales on cash worth P60,000. On Jan. 26, the company paid P15,000 worth of salaries and P5,000 worth of advertising. Compute you cash beginning balance. On Jan. 01, Ricca Inc. sales balance is P50,000. On Jan. 13, sales on cash is worth P25,000. On Jan. 25, another sales worth P30,000 where 50% is on account. A customer returned P1,500 worth of items due to excessive order. Compute Ricca Inc.’s total sales. On Jan. 01, Ronald Co. accounts payable balance is P40,000. On Jan. 13, the owner purchased on credit worth P25,000. On Jan. 25, he has another purchases worth P30,000 where 50% is on cash. On Jan.…arrow_forwardCan you explain how you got the figure for purchase of equipment (215,000) and also please answer the below multiple choice: The term cash as used on the statement of cash flows includes all the following EXCEPT: A) cash due from customers within 30 days. B) cash on hand. C) cash equivalents. D) cash in bank Which of the following statements accurately describes the statement of cash flows? A) It shows the relative proportion of debt and assets. B) It shows the link between accrual-based income and the cash reported on the balance sheet. C) It indicates when long-term debt will mature. D) It shows the link between book income and earnings per share. Which of the following is NOT a true statement about the statement of cash flows? A) It shows where cash came from and how it was spent. B) It reports why cash increased or decreased. C) It covers a specific span of time the same as the income statement. D) It shows how the profits or losses of the company were generated.…arrow_forward
- Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Rusco CompanyComparative Balance Sheetat July 31 This Year Last Year Assets Current assets: Cash $ 8,000 $ 21,000 Accounts receivable 120,000 80,000 Inventory 140,000 90,000 Prepaid expenses 5,000 9,000 Total…arrow_forwardMary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Rusco CompanyComparative Balance Sheetat July 31 This Year Last Year Assets Current assets: Cash $ 8,000 $ 21,000 Accounts receivable 120,000 80,000 Inventory 140,000 90,000 Prepaid expenses 5,000 9,000 Total…arrow_forwardSaturn Computer is considering to expand, but before that, the management wants to know the financial position of the company compared to that of the industry. Data for Saturn Computer Co. and its industry averages follow. Items Amount ($) Items Amounts ($) Cash 87,500 Accounts Payable 110,000 Total Operating Expense 123,000 Interest Expense 26,500 Income Tax 18,200 Total Sales 1,607,500 Net Fixed Assets 292,500 Long-term Bank Loan 246,500 Cost of Goods Sold 1,352,500 Common Stock Equity 361,000 Inventories 211,500 Other Current Liabilities 84,000 Accounts Receivables 336,000 Notes Payable (Maturity within 1 year) 107,000 Total Operating Profit 110,000 Net Profit after tax 88,300…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
ACCOUNTING BASICS: Debits and Credits Explained; Author: Accounting Stuff;https://www.youtube.com/watch?v=VhwZ9t2b3Zk;License: Standard Youtube License