ACC 206 Week 1 Assignment Chapter One Problems

Ch 1 Critical Thinking Question 5:

Answer the following questions:
Why are noncash transactions, such as the exchange of common stock a building, i
ncluded on a statement of cash flows? How are these noncash transactions disclos
ed?

Chapter 1 Exercise 1:
1. Classification of activities
Classify each of the following transactions as arising from an operating (O), in
vesting (I), financing (F), or noncash investing/financing (N) activity.
a. ________ Received $80,000 from the sale of land.
b. ________ Received $3,200 from cash sales.
c. ________ Paid a $5,000 dividend.
d. ________ Purchased $8,800 of merchandise for cash.
e. ________ Received $100,000 from the issuance of common stock.
f. ________ Paid $1,200 of interest on a note payable.
g. ________ Acquired a new laser printer by paying $650.
h. ________ Acquired a $400,000 building by signing a $400,000 mortgage note
.

Chapter 1 Exercise 4:
4. Overview of direct and indirect methods
Evaluate the comments that follow as being True or False. If the comment is fals
e, briefly explain why.
a. Both the direct and indirect methods will produce the same cash flow fro
m operating activities.
b. Depreciation expense is added back to net income when the indirect metho
d is used.
c. One of the advantages of using the direct method rather than the indirec
t method is that larger cash flows from financing activities will be reported.
d. The cash paid to suppliers is normally disclosed on the statement of cas
h flows when the indirect method of statement preparation is employed.
e. The dollar change in the Merchandise Inventory account appears on the st
atement of cash flows only when the direct method of statement preparation is us
ed.

Chapter 1 Exercise 6:
6. Equipment transaction and cash flow reporting
New equipment purchased during 20x4 totaled $280,000. The 20x4 income statement
disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sal
e of equipment.
a. Determine the cost and accumulated depreciation of the equipment sold du
ring 20X4.
b. Determine the selling price of the equipment sold.
c. 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 methods
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the fol
lowing activity in the company's current accounts.
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