The statement of cash flows classifies an enterprise’s cash flows into three categories. Investing activities typically include the purchase and sale of securities of other entities and the purchase and sale of property, plant, and equipment. Thus, the am
The exchange of debt for a long-lived asset does not involve a cash flow. It is therefore classified as a noncash financing and investing activity.
Noncash financing and investing activity
Revenues are normally recognized when they are realized or realizable and earned. Revenues are realized (or realizable) when goods or services have been exchanged for cash or claims to cash (assets readily convertible to cash). Revenues are earned when th
Quarterly financial statements are prepared
Cash is received.
The sale occurs.
Production is completed.
Answer (C) is correct. Total credits to equity equal $1,750,000 ($600,000 common stock at par + $800,000 additional paid-in capital + $350,000 retained earnings). The treasury stock recorded at cost is subtracted from (debited to) total equity, and the u
The purchase of land and a building in exchange for a long-term note is a noncash investing activity that does not affect net income. Thus, it is reported in the related disclosures section of the cash flow statement but is not a reconciling item.
Decrease in inventory.
Increase in income tax payable.
Decrease in prepaid insurance.
Purchase of land and building in exchange for a long-term note.
Cost of goods sold equals cost of goods manufactured (COGM) adjusted for the change in finished goods. COGM equals the sum of raw materials used, direct labor costs, and production overhead, adjusted for the change in work-in-progress. Raw materials used
Prior-period adjustments are made for the correction of errors. According to SFAS 16, Prior Period Adjustments, the effects of errors on prior-period financial statements are reported as adjustments to beginning retained earnings for the earliest period p
Do not include the effect of a mistake in the application of accounting principles, as this is accounted for as a change in accounting principle rather than as a prior-period adjustment.
Do not require further disclosure in the body of the financial statements.
Do not affect the presentation of prior-period comparative financial statements.
Are reflected as adjustments of the opening balance of the retained earnings of the earliest period presented.
Answer (B) is correct. This solution requires a series of computations. Beginning raw materials $ 38,000 Add: net purchases raw materials $115,000 Materials available $153,000 Less: ending materials (45,000) Materials used in production $108,000 Direct
$468,500 and $470,900, respectively.
$468,500 and $439,500, respectively
$646,500 and $617,500, respectively.
$460,500 and $489,500, respectively.
When a property dividend is declared, the property is remeasured at its fair value as of the declaration date. This amount is then reclassified from retained earnings to property dividends payable.
If an entity that presents a full set of financial statements has items of other comprehensive income (OCI), it must present comprehensive income either (1) in a single continuous statement of comprehensive income or (2) in two separate but consecutive st
I, II, and III only.
I and II only.
I and IV only.
III and IV only.
All noncash transactions are excluded from the body of the statement of cash flows to avoid undue complexity and detraction from the objective of providing information about cash flows. Information about all noncash financing and investing activities affe
Operating and nonoperating cash flow information.
Purchasing a building by giving a mortgage to the seller.
Conversion of debt to equity.
Acquiring an asset through a capital lease.
Comprehensive income includes all changes in equity of a business entity except those changes resulting from investments by owners and distributions to owners. Comprehensive income includes two major categories: net income and other comprehensive income (
The change in net assets for the period excluding owner transactions.
Net income excluding extraordinary gains and losses.
Total revenues minus total expenses.
The change in net assets for the period including contributions by owners and distributions to owners.
A 2-for-1 stock split doubles the number of shares outstanding; retained earnings is not affected. Under a stock dividend, however, a portion of retained earnings is reclassified as common stock. Since dividends are restricted by the amount of available r
The impact on earnings per share will not be as great.
The par value per share will remain unchanged.
It will not decrease shareholders’ equity.
It will not impair the company’s ability to pay dividends in the future.
Managerial accounting assists management decision making, planning, and control. Financial accounting addresses accounting for an entity’s assets, liabilities, revenues, expenses, and other elements of financial statements. Financial statements are the pr
Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them.
Managerial accounting has a past focus, and financial accounting has a future focus.
The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness.
Managerial accounting is generally more precise.
The direct method converts the accrual-basis amounts in the income statement to the cash basis. It then reports the separate categories of gross cash receipts and disbursements. Net cash flow from operating activities is the difference between total cash
Format of the statement of cash flows.
Direct method of calculating net cash provided or used by operating activities.
Cash method of determining income in conformity with generally accepted accounting principles.
Indirect method of calculating net cash provided or used by operating activities.
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