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Title: Accountin Cycle Excersise
Description: This book is the first of seven books which introduces the basic principles of accounting. It introduces accounting, the fundamental accounting equation, and four core financial statements. Students will learn the basics of accounting, such as debits and credits, the journal, and trial balance, income measurement, revenue and expense recognition, and the reporting cycle. With a foundation in these basics of accounting readers are introduced to financial statement preparation, the accounting cycle, closing entries, classified balance sheets, the importance of business liquidity, and the concept of the operating cycle.
Description: This book is the first of seven books which introduces the basic principles of accounting. It introduces accounting, the fundamental accounting equation, and four core financial statements. Students will learn the basics of accounting, such as debits and credits, the journal, and trial balance, income measurement, revenue and expense recognition, and the reporting cycle. With a foundation in these basics of accounting readers are introduced to financial statement preparation, the accounting cycle, closing entries, classified balance sheets, the importance of business liquidity, and the concept of the operating cycle.
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Accounting Cycle Exercises I
Larry M
...
Skousen
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Larry M
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Skousen
Accounting Cycle Exercises I
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Larry M
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ISBN 978-87-7681-554-7
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Accounting Cycle Exercises I
Contents
Problem 5
20
Worksheet 5
20
Solution 5
34
Problem 6
46
Worksheet 6
46
Solution 6
47
Problem 7
48
Worksheet
49
Solution 7
52
Problem 8
55
Worksheet 8
Solution 8
360°
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57
58
360°
thinking
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Deloitte & Touche LLP and affiliated entities
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Dis
Accounting Cycle Exercises I
Problem 1
Problem 1
Juniper Corporation provided the following summary balance sheet information:
Dec
...
31, 20X9
$2,500,000
$3,800,000
900,000
1,300,000
Total liabilities
Compute net income for the year ending December 31, 20X9, under each of the following
independent scenarios:
a) Juniper paid no dividends, and no additional capital was raised via share issuances
...
c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock
...
Worksheet 1
Dec
...
31, 20X9
$2,500,000
$3,800,000
900,000
1,300,000
Total assets
Total liabilities
Total Equity
Ending Equity
Total liabilities
Total Equity
a) Juniper paid no dividends, and no additional capital was raised via share issuances
...
c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock
...
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31, 20X8
$2,500,000
$3,800,000
900,000
1,300,000
$ 1,600,000
Total assets
Dec
...
Because there were no dividends and no issues of stock, the $900,000 increase in equity is all
attributable to net income
...
Because there were $300,000 in dividends and no issues of stock, the $900,000 increase in
equity would require a $1,200,000 net income
...
Because there were no dividends, but $1,500,000 of stock issuances, Juniper had a net loss of
$600,000
...
Because there were $300,000 in dividends, and $1,150,000 of stock issuances, Juniper had a
net income of $50,000
...
com
7
Accounting Cycle Exercises I
Problem 2
Problem 2
TOP Corporation was formed at the beginning of 20X2, and presents the following incomplete financial
statements for three years
...
Hint: Begin by solving the unknowns in the 20X2 year, and work forward to subsquent years
...
TOP CORPORATION
Income Statement
For the Years Ending December 31, 20XX
20X4
20X3
20X2
Revenues
Services to customers
$ 100,000
?
$ 50,000
Expenses
Wages
?
Interest
Net income
$ 58,500
1,500
?
1,500
?
?
?
2,500
$ 20,000
?
?
TOP CORPORATION
Statement of Retained Earnings
For the Years Ending December 31, 20XX
20X4
Beginning retained earnings
?
Plus: Net income
20X3
?
?
Ending retained earnings
$20,000
?
Less: Dividends
20X2
?
?
$ 12,500
15,000
?
?
$ 30,000
?
?
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2,500
?
?
Accounting Cycle Exercises I
Problem 2
TOP CORPORATION
Statement of Retained Earnings
For the Years Ending December 31, 20XX
20X4
20X3
20X2
Beginning retained earnings
?
?
$
Plus: Net income
?
20,000
?
?
?
$ 12,500
15,000
?
?
$ 30,000
?
?
Less: Dividends
Ending retained earnings
-
TOP CORPORATION
Balance Sheet
December 31, 20XX
20X4
20X3
20X2
Assets
Cash
?
Accounts receivable
?
32,500
Land
90,000
Total assets
$ 25,000
25,000
?
90,000
90,000
$ 144,500
?
?
Liabilities
Interest payable
?
Loan payable
$
5,000
Total liabilities
500
$
?
$
1,000
?
5,500
$ 15,500
?
Stockholders’ equity
Capital stock
?
Retained earnings
?
Total stockholders’
equity
Total Liabilities and
equity
?
$114,000
15,000
?
?
?
119,000
$ 149,500
?
$ 150,000
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Accounting Cycle Exercises I
Problem 3
Problem 3
Prepare Bologna’s income statement, statement of retained earnings, and balance sheet for the year
ending December 31, 20X5
...
Be sure to prepare proper
headings and dates on each financial statement
...
com
13
Accounting Cycle Exercises I
Problem 3
BOLOGNA COMPANY
Ending retained earnings
Assets
Total assets
Liabilities
Total liabilities
Stockholders’ equity
Total stockholders’ equity
Total liabilities and equity
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Month 16
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Accounting Cycle Exercises I
Problem 4
Problem 4
Scream Clean Company provided the following very limited set of data
...
The company was formed
at the beginning of January, 20X6 by issuing $350,000 of capital stock
...
The company’s 20X9 dividends were equal to 50% of the 20X9 net income
...
000
Dividends, 20X8
52
...
000
Total liabilities, December 31, 20X8
770
...
500
Expenses, 20X7
154
...
000
Dividends, 20X6
35
...
750
...
000
Worksheet 4
• 20X6
• 20X7
• 20X8
• 20X9
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Accounting Cycle Exercises I
Problem 4
• 20X8
Total equity, December 31, 20X8
$ 735,000
Less: Capital stock
350,000
Retained earnings, December 31, 20X8
$ 385,000
Less: Retained earnings, December 31, 20X7
280,000
Increase in retained earnings during 20X8
$ 105,000
Plus: Dividends paid during 20X8
52,500
Net income for the year ending December 31, 20X8
$ 157,500
• 20X9
Total liabilities, December 31, 20X8
$ 770,000
Plus: Increase in liabilities during 20X9
175,000
Total liabilities, December 31, 20X9
$ 945,000
$ -
Total assets, December 31, 20X9
$ 1,750,000
Less: Total liabilities, December 31, 20X9
945,000
Total equity, December 31, 20X9
$ 805,000
Less: Capital stock
350,000
Retained earnings, December 31, 20X9
$ 455,000
Less: Retained earnings, December 31, 20X8
385,000
Increase in retained earnings during 20X9
$ 70,000
The 20X9 net income was $140,000
Proof:
Dividends = Net Income X 50%
Increase in Retained Earnings = Net Income - Dividends
thus:
$70,000 = Net income - (Net income X 50%)
$70,000 = 0
...
com
19
Accounting Cycle Exercises I
Problem 5
Problem 5
Rajagopul Corporation is a newly formed company
...
Prepare an income statement, statement of retained earnings, and balance sheet immediately
following each of these consecutive transactions
...
Issued capital stock for $100,000 cash
...
Purchased building for $240,000, making a $40,000 down payment and signing a
promissory note payable for the balance
...
Paid Wages expense of $10,000
...
Provided Services to customers for $30,000 cash
...
Paid Utilities expense of $4,000
...
Reduced note payable with an $16,000 cash payment (ignore interest costs)
...
Provided Services to customers on account, $20,000
...
Incurred Wages expense of $6,000, to be paid in the future
...
Collected $8,000 on an outstanding account receivable
...
Declared and paid dividend of $12,000
...
com
20
Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #1
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #3)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
Net income
$ -
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #3)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #3
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #5)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #5
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #6
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #7)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
Net income
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #8)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
Net income
$ -
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #8)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #8
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #9)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
Net income
$ -
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #9)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
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Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #10)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
Net income
$ -
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #10)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #10
Assets
Cash
$ -
Accounts receivable
-
Building
-
Total assets
$ -
Liabilities
Wages payable
$ -
Notes payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
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000
$ 100,000
Total assets
Liabilities
Wages payable
$
Notes payable
-
Total liabilities
$
-
Stockholders’ equity
Capital stock
$ 100,000
Retained earnings
-
Total stockholders’ equity
100,000
$ 100,000
Total liabilities and equity
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000
Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #2)
Revenues
Services to customers
$ -
Expenses
Wages
$ -
Utilities
-
-
Net income
$ -
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #2)
Beginning retained earnings
$ -
Plus: Net income
$ -
Less: Dividends
-
Ending retained earnings
$ -
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #2
Assets
Cash
$
Accounts receivable
60,000
-
Cash increases
$ 40
...
000
$ 200,000
Building
Notes payable
increases
$ 200
...
com
35
Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #3)
Revenues
Services to customers
$
-
Expenses
Wages
$ 100,000
Utilities
-
10,000
$ (10,000)
Net income
Wages Expense
increases
$ 10
...
indd 1
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000
240,000
$ 290,000
Total assets
Liabilities
Wages payable
$
-
Notes payable
200,000
Total liabilities
$ 200,000
Stockholders’ equity
Capital stock
$ 100,000
Retained earnings
(10,000)
Total stockholders’ equity
90,000
$ 290,000
Total liabilities and equity
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #4)
Revenues
Services to customers
$
30,000
Expenses
Wages
$
10,000
Utilities
-
10,000
$
Net income
20,000
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #4)
Beginning retained earnings
$ -
Plus: Net income
20,000
$ 20,000
Less: Dividends
-
Ending retained earnings
$ 20,000
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000
Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Balance Sheet
As of Completion of Transaction #4
Assets
Cash
$
80,000
Accounts receivable
-
Building
Cash inreases
$ 30
...
com
38
Utilities Expense
increases
$ 4
...
000
240,000
$ 316,000
Total assets
Liabilities
Wages payable
$
Notes payable
200,000
Total liabilities
$ 200,000
Stockholders’ equity
Capital stock
$ 100,000
Retained earnings
16,000
Total stockholders’ equity
116,000
$ 316,000
Total liabilities and equity
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000
240,000
$ 300,000
Total assets
Liabilities
Wages payable
$
Notes payable
184,000
Total liabilities
$ 184,000
Stockholders’ equity
Capital stock
$ 100,000
Retained earnings
16,000
Total stockholders’ equity
116,000
$ 300,000
Total liabilities and equity
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000
Accounting Cycle Exercises I
Problem 5
RAJAGOPUL CORPORATION
Income Statement
For the Month (through transaction #7)
Revenues
Services to customers
$
50,000
Expenses
Wages
$
10,000
Utilities
4,000
14,000
$
Net income
Revenue
increases
$ 20
...
com
41
Accounts
receivable
increases
$ 20
...
000
RAJAGOPUL CORPORATION
Statement of Retained Earnings
For the Month (through transaction #8)
Beginning retained earnings
$ -
Plus: Net income
30,000
$ 30,000
Less: Dividends
-
Ending retained earnings
$ 30,000
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Wages Payable
increases
$ 6
...
000
Accounts
Receivable
decreases
$ 8
...
com
44
18,000
Dividends
increases
$ 12
...
000
240,000
$ 308,000
Total assets
Liabilities
Wages payable
$
Notes payable
6,000
184,000
Total liabilities
$ 190,000
Stockholders’ equity
Capital stock
$ 100,000
Retained earnings
18,000
Total stockholders’ equity
118,000
$ 308,000
Total liabilities and equity
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Accounting Cycle Exercises I
Problem 6
Problem 6
Glasgow Corporation provided the following listing of financial statement elements and their respective
balances
...
Unfortunately, the company
has been unable to locate its listing of assets, but all other information is complete, albeit in disarray
...
b) How much are Total assets of the company, as of December 31, 20X9?
c) If you were told that assets included an accounts receivable of $7,500 for services provided
during 20X9, and that such transactions had been excluded in calculating the given
“revenue” amount, how would this influence your answer to part (a) above?
Worksheet 6
a) Revenue
$ 120,000
b)
c)
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This would result in an increase in net income (and therefore retained earnings
and total equity) to match the increase in Total assets
...
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The company was formed by
Cliff Smithson with the goal of conducting geophysical support services related to natural gas drilling
operations in the Unita Basin region of eastern Utah
...
During the first year of operation, the company purchased land, buildings, and equipment in the amount
of $400,000, $1,000,000, and $600,000, respectively
...
During 20X3, the company signed contracts to deliver consulting services with a total value of $5,000,000
...
The other
$1,800,000 of work will not be performed until 20X4
...
The Smithson’s are quite confident
that the December billing will be collected in the normal course of business in early 20X4
...
com
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Accounting Cycle Exercises I
Problem 7
Expenses paid during 20X3 included rent ($280,000), Wages ($1,560,000), interest ($150,000), and
taxes ($430,000)
...
Smithson Exploration declared and paid dividends to shareholders in the amount of $150,000 during
20X3
...
a) Prepare an income statement for Smithson Corporation for the year ending
December 31, 20X3
...
c) Prepare calculations showing that cash is $1,780,000 as of December 31, 20X3
...
Worksheet
a) and
b)
SMITHSON CORPORATION
Income Statement
For the Year Ending December 31, 20X3
Revenues
Services to customers
$ -
Expenses
Rent
$ -
Wages
-
Interest
-
Taxes
-
Net income
$ -
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Accounting Cycle Exercises I
Problem 7
Smithson CORPORATION
Balance Sheet
December 31, 20X3
Assets
Cash
$ -
Accounts receivable
-
Land
-
Building
-
Equipment
-
Total assets
$ -
Liabilities
Rent payable
$ -
Wages payable
-
Interest payable
-
Loan payable
-
Total liabilities
$ -
Stockholders’ equity
Capital stock
$ -
Retained earnings
-
Total stockholders’ equity
-
Total liabilities and equity
$ -
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Accounting Cycle Exercises I
Problem 7
SMITHSON CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 20X3
Beginning retained earnings
$ -
Plus: Net income
688,000
$ 688,000
Less: Dividends
150,000
Ending retained earnings
$ 538,000
c)
Cash received:
$ 2,950,000
From customers ($3,200,000 – $250,000)
2,000,000
From stockholders
1,500,000
$ 6,450,000
From lenders
Cash payments:
For rent
$ 280,000
For Wages
1,560,000
For interest
150,000
For taxes
430,000
For divindends
150,000
For land, building, equipment
2,000,000
For repayment of loans
100,000
Ending cash
4,670,000
$ 1,780,000
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Accounting Cycle Exercises I
Problem 8
Problem 8
Thai Company was formed on January 1, 20X1
...
Mr
...
THAI COMPANY
Income Statement
For the Year Ending December 31, 20X1
Revenues
Services to customers
$ 105,000
Expenses
Wages
$ 45,000
Rent
18,000
Net income
3,000
$ 42,000
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Accounting Cycle Exercises I
Problem 8
Thai company
Statement of Retained Earnings
For the Year Ending December 31, 20X1
Beginning retained earnings
$ -
Plus: Net income
42,000
$ 42,000
Less: Dividends
-
Ending retained earnings
$ 42,000
THAI company
Balance Sheet
December 31, 20X1
Assets
Cash
$ 6,000
Accounts receivable
22,500
Equipment
75,000
Total assets
$ 103,500
Liabilities
Rent payable
$ 1,500
Notes payable
45,000
Total liabilities
$ 46,500
Stockholders’ equity
Capital stock
$ 15,000
Retained earnings
42,000
Total stockholders’ equity
57,000
Total liabilities and equity
$ 103,500
a) Is the company currently able to declare and pay the dividend? Why or why not?
b) Explain why net income can differ from cash provided by operations
...
d) Prepare a statement of cash flows for Thai Company for the year ending
December 31, 20X1
...
com
56
Accounting Cycle Exercises I
Problem 8
Worksheet 8
a)
b)
c)
d) At this point in your study, you will be challenged to prepare the following statement of cash
flows! If you avoid changing the formulas in column “F” of the electronic spreadsheet, you
should simplify your search for the correct answer
...
com
57
Accounting Cycle Exercises I
Problem 8
Solution 8
a) Thai is unable to pay a $42,000 dividend
...
b) In the short run, many things will cause net income to differ from cash provided by
operations
...
In Thai’s case, notice that $22,500 of the revenues have not yet been collected, as
evidenced by the increase in accounts receivable
...
c) A business will generate or expend cash from investing activities (like buying and selling
property, investment securities, and so forth)
...
d) At this point in their studies, most students will be challenged to prepare the following
statement of cash flows! The student worksheet includes substantial preformatting to aid the
process
...
The preparation and
use is the subject of a complete chapter much later in the book
Title: Accountin Cycle Excersise
Description: This book is the first of seven books which introduces the basic principles of accounting. It introduces accounting, the fundamental accounting equation, and four core financial statements. Students will learn the basics of accounting, such as debits and credits, the journal, and trial balance, income measurement, revenue and expense recognition, and the reporting cycle. With a foundation in these basics of accounting readers are introduced to financial statement preparation, the accounting cycle, closing entries, classified balance sheets, the importance of business liquidity, and the concept of the operating cycle.
Description: This book is the first of seven books which introduces the basic principles of accounting. It introduces accounting, the fundamental accounting equation, and four core financial statements. Students will learn the basics of accounting, such as debits and credits, the journal, and trial balance, income measurement, revenue and expense recognition, and the reporting cycle. With a foundation in these basics of accounting readers are introduced to financial statement preparation, the accounting cycle, closing entries, classified balance sheets, the importance of business liquidity, and the concept of the operating cycle.