Statement of Cash Flows
Which of the following activities would be classified on an entity's statement of cash flows as an investing activity?
A - Increase in accounts receivable
B - Sale of Property, Plant, and Equipment
C - Issuance of common stock to the shareholders
D - Payment of cash dividend to the shareholders
B - PP&E is classified as investing on the statement of cashflow.
Farleigh Co. has not declared or paid dividends on its cumulative preferred stock in the last three years. How should these dividends be reported? (i.e. liability, equity, and/or a disclosure to the financial statements?)
What type of financial statements would provide information about the ongoing revenues and expenses associated with a voluntary health and welfare organization? (i.e. what is the name)
The statement of activities - Similar to an Income statement for commercial entities.
The primary emphasis in accounting and reporting for governmental funds is on what?
Source, use, and balance of current financial resources.
In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment with the gain or without the gain?
With the gain. If used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment plus the gain.
During the current year, Onal Co. Purchased 10,000 shares of its won stock at $7 per share. The stock was originally issued at $6. The firm sold 5,000 of the treasury shares for $10 per share. The firm uses the cost method to account for treasury stock. What amount should Onal report in its income statement for these transactions?
$0 Gains and losses on treasury stock transactions are never recorded on the income statement. Gains are recorded by increasing Additional Paid-in Capital - Treasury Stock. Losses are recorded by first eliminating any balance in Additional Paid-in Capital - Treasury Stock and then decreasing Retained Earnings.
nongovernmental not-for-profit organizations are required to provide which external financial statements? (hint - there are three)
Statement of financial position, statement of activities, statement of cash flows.
What basis of accounting should be used when preparing a governmental funds statement of revenues, expenditures, and changes in fund balances?
Modified accrual basis of accounting - Governmental funds use the modified accrual basis of accounting in combination with the current resources measurement focus to measure and present transactions.
Mend Co. purchased a three-month U.S. Treasury bill. Mend's policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend's statement of cash flows?
East Co. issued 1,000 shares of its $5 Par common stock to Howe as compensation for 1,000 hours of legal services performed. How usually bills $160 per hour for legal services. On the date of issuance, the stock was trading on a public exchange at $140 per share. By what amount should the additional paid-in capital account increase as a result of this transaction?
$135,000 or $140,000 for the $140 value on the exchange less the $5,000 par value
In Year 2, the Nord Association, a nongovernmental not-for-profit organization, received a $100,000 contribution to fund scholarships for medical students. The donor stipulated that only the interest earned on the contribution be used for the scholarships. Interest earned in Year 2 of $15,000 was used to award scholarships in Year 3. What amount should Nord report as net assets with donor restrictions?
$115,000 or $100,000 restrictions in perpetuity and $15,000 that are temporary in nature.
Which of the following transactions should be reported as a liability in the general fund financial statements?
A - an amount to be paid from current financial resources
B - An amount set aside to pay for an unfilled contract
C - Principal on long-term debt due 90 days after the balance sheet date
D - an amount that is due within one year of the balance sheet date.
A - Liabilities in the general fund's financial statements would be an amount to be paid from current financial resources in accordance with the current financial resources.
New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,00. New England's cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was New England's cash balance at the end of the year?
$208,000 or
$27,000 + $351,000 - $420,000 + $250,000 = $208,000
The sale of the land was already included in the cash from investing activities and does not need separate consideration. Note: Net cash used is and outflow, net cash provided is an inflow.
East Corp., a calendar-year company, had sufficient retained earnings in Year 1 as a basis for dividends, but was temporarily short of cash. East declared a dividend of $100,000 on April 1, Year 1, and issued promissory notes to its stockholder in lieu of cash. The notes, which were dated April 1, Year 1, had a maturity date of March 31, Year 2, and a 10% interest rate. How should East account for the scrip dividend and related interest? (i.e. what are the Journal entries?)
Debit retained earnings for $100,000 on April 1, Year 1, Credit notes Payable and debit interest expense for $7,500 on December 31, Year 1, Credit Interest Payable.
The Jackson Foundation, a not-for-profit organization, received contributions in Year 1 as follow:
- Cash Contributions of $500,000 without donor restrictions
- Cash Contributions of $200,000 with donor restrictions with specific requirements relative to the acquisition of property.
Jackson's statement of cash flows in Year one should report what amount in the operating, investing, and financing activities?
$500,000 in Operating
$0 in Investing
$200,000 in Financing - restriction is for the acquisition of property
At the beginning of year 2, a government entity had a $500,000 judgement outstanding. The government entity paid $400,000 of the judgment during Year 2. he remaining balance of the judgment includes $25,000 payable early in Year 3 and $75,000 payable at the end of year 4. What amount should the government entity report as a liability for the judgment in its Year 2 governmental fund financial statements?
$25,000 - The governmental entity would report a $25,000 liability in their governmental funds consistent with the current financial resources. No non-current liabilities are reported.