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ACCT 382 - Week 4 - Chapter 4 Homework

ACCT 382 - Week 4 - Chapter 4 Homework
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ACCT 382 - Week 4 - Chapter 4 Homework

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Question 1

The following is a partial trial balance for the Green Star Corporation as of December 31, 2013:

  Account Title

    Debits

   Credits

  Sales revenue

 

1,300,000    

  Interest revenue

 

30,000    

  Gain on sale of investments

 

50,000    

  Cost of goods sold

720,000    

 

  Selling expense

160,000    

 

  General and administrative expenses

75,000    

 

  Interest expense

40,000    

 

  Income tax expense

130,000    

 


100,000 shares of common stock were outstanding throughout 2013.

 

Question 2

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2013, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2013, at a price of $600,000. The book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale.

      The division incurred a before-tax operating loss from operations of $130,000 from the beginning of the year through December 15. The income tax rate is 40%. Chance’s after-tax income from its continuing operations is $350,000.

 

Question 3

The Esposito Import Company had 1 million shares of common stock outstanding during 2013. Its income statement reported the following items: income from continuing operations, $5 million; loss from discontinued operations, $1.6 million; extraordinary gain, $2.2 million. All of these amounts are net of tax.

 

Question 4

The statement of cash flows classifies all cash inflows and outflows into one of the three categories shown below and lettered from a through c. In addition, certain transactions that do not involve cash are reported in the statement as noncash investing and financing activities, labeled d.
a. Operating activities
b. Investing activities
c. Financing activities
d. Noncash investing and financing activities

 

Question 5

The following summary transactions occurred during 2013 for Bluebonnet Bakers:

 

 

 

  Cash Received from:

 

 

     Customers

$

380,000  

     Interest on note receivable

 

6,000  

     Principal on note receivable

 

50,000  

     Sale of investments

 

30,000  

     Proceeds from note payable

 

100,000  

  Cash Paid for:

 

 

     Purchase of inventory

 

160,000  

     Interest on note payable

 

5,000  

     Purchase of equipment

 

85,000  

     Salaries to employees

 

90,000  

     Principal on note payable

 

25,000  

     Payment of dividends to shareholders

 

20,000  


The balance of cash and cash equivalents at the beginning of 2013 was $17,000.

 

Question 6

The following transactions occurred during March 2013 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1.

Issued 30,000 shares of capital stock in exchange for $300,000 in cash.

2.

Purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.

3.

Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.

4.

Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.

5.

Paid $5,000 in rent on the warehouse building for the month of March.

6.

Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2013.

7.

Paid $70,000 on account for the merchandise purchased in 3.

8.

Collected $55,000 from customers on account.

9.

Recorded depreciation expense of $1,000 for the month on the equipment.

 

Question 7

Listed below are several terms and phrases associated with income statement presentation and the statement of cash flows. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

 

 

List A

List B

 

1.

Intraperiod tax allocation

.

Unusual, infrequent, and material gains and losses.

 

2.

Comprehensive income

 

Starts with net income and works backwards to convert to cash.

 

3.

Extraordinary items

 

Reports the cash effects of each operating activity directly on the statement.

 

4.

Operating income

 

Correction of a material error of a prior period.

 

5.

A discontinued operation

 

Related to the external financing of the company.

 

6.

Earnings per share

 

Associates tax with income statement item.

 

7.

Prior period adjustment

 

Total nonowner change in equity.

 

8.

Financing activities

 

Related to the transactions entering into the determination of net income.

 

9.

Operating activities (SCF)

 

Related to the acquisition and disposition of long-term assets.

 

10.

Investing activities

 

Required disclosure for publicly traded corporation.

 

11.

Direct method

 

A component of an entity.

 

12.

Indirect method

 

Directly related to principal revenue-generating activities.