1. Principles of Accounting
ACC 206 ACC206 Principles of Accounting II WEEK 1 ( Chapter 1 Problems ) SCORE
100%Chapter One ProblemsPlease complete the following 5 exercises below in either Excel
or a word document (but must be single document). You must show your work where
appropriate (leaving the calculations within Excel cells is acceptable). Save the document,
and submit it in the appropriate week using the Assignment Submission button.Ch 1 Critical
Thinking Question 5:Answer the following questions:Why are noncash transactions, such as
the exchange of common stock a building, included on a statement of cash flows? How are
these noncash transactions disclosed?Chapter 1 Exercise 1:1. Classification of
activitiesClassify each of the following transactions as arising from an operating (O),
investing (I), financing (F), or noncash investing/financing (N) activity.________ Received
$80,000 from the sale of land.________ Received $3,200 from cash sales.________ Paid a $5,000
dividend.________ Purchased $8,800 of merchandise for cash.________ Received $100,000 from
the issuance of common stock.________ Paid $1,200 of interest on a note payable.________
Acquired a new laser printer by paying $650.________ Acquired a $400,000 building by
signing a $400,000 mortgage note.Chapter 1 Exercise 4:4. Overview of direct and indirect
methodsEvaluate the comments that follow as being True or False. If the comment is false,
briefly explain why.Both the direct and indirect methods will produce the same cash flow
from operating activities.Depreciation expense is aIDed back to net income when the
indirect method is used.One of the advantages of using the direct method rather than the
indirect method is that larger cash flows from financing activities will be reported.The cash
paid to suppliers is normally disclosed on the statement of cash flows when the indirect
method of statement preparation is employed.The dollar change in the Merchandise
Inventory account appears on the statement of cash flows only when the direct method of
statement preparation is used.Chapter 1 Exercise 6:6. Equipment transaction and cash flow
reportingProperty, plant, & equipmentDec. 31, 19X4Dec. 31,
19X3Land$94,000$94,000Equipment652,000527,000Less: Accumulated depreciation-
316,000-341,000New equipment purchased during 20×4 totaled $280,000. The 20×4
income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss
on the sale of equipment.Determine the cost and accumulated depreciation of the
equipment sold during 19X4.Determine the selling price of the equipment sold.Show how
the sale of equipment would appear on a statement of cash flows prepared by using the
indirect method.Chapter 1 Problem 3:3. Cash flow information: Direct and indirect
methodsThe comparative year-end balance sheets of Sign Graphics, Inc., revealed the
2. following activity in the company’ s current accounts:19X519X4Increase /
Decrease)Current assetsCash$55,400$35,200$20,200Accounts receivable
(net)83,80088,000-4,200Inventory243,400233,8009,600Prepaid
expenses25,40024,2001,200Current liabilitiesAccounts
payable$123,600$140,600($17,000)Taxes payable43,60049,200-5,600Interest
payable9,0006,4002,600Accrued liabilities38,80060,400-21,600Note
payable44,000—
44,000The 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 Statementfor the Year Ended December 31, 20×5Sales$713,800Less: Cost of
goods sold323,000Gross profit$390,800Less: Selling & administrative
expenses$186,000Depreciation expense17,000Interest expense27,000230,000AID: gain on
sale of land$160,80021,800Income before taxes$182,600Income taxes36,800Net
income$145,800Other data:Long-term investments were purchased for cash at a cost of
$74,600.Cash proceeds from the sale of land totaled $76,200.Store equipment of $44,000
was purchased by signing a short-term note payable. Also, a $150,000 telecommunications
system was acquired by issuing 3,000 shares of preferred stock.A long-term note of $49,400
was repaid.Twenty thousand shares of common stock were issued at $5.19 per share.The
company paid cash dividends amounting to $128,600.Instructions:Prepare the operating
activities section of the company’ s statement of cash flows, assuming use of:The direct
method.The indirect method.Prepare the investing and financing activities sections of the
statement of cash flows.
