Q20BP Identify whether each of the fol... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: Q20BP (page 52)

Identify whether each of the following items increases or decreases cash flow:
Increase in accounts receivable
Decrease in prepaid expenses
Increase in notes payable
Increase in inventory
Depreciation expense
Dividend payment
Increase in investment
Increase in accrued expenses
Decrease in account payable

Short Answer

Expert verified

An increase in account receivable, decrease in prepaid expense, and increase in accrued expense cause an increase in the cash flow. Whereas an increase in notes payable, decrease in account payable, increase in investment, increase in inventory, and dividend payment causes the decrease in cash flow. In addition, depreciation expense is a non-cash transaction.

Step by step solution

Cash flow statement

A cash flow statement is defined as the statement prepared to show the cash inflow and outflow of the company.It represents the reconciliation of the opening and closing balance of the cash account.

Classification of the transaction as increase or decrease in the cash flows

Transaction	Classification
Increase in accounts receivable	Increase in cash flow
Increase in notes payable	Decrease in cash flow
Depreciation expense	Non-cash transaction
Increase in investment	Decrease in cash flow
Decrease in account payable	Decrease in cash flow
Decrease in prepaid expense	Increase in cash flow
Increase in inventory	Decrease in cash flow
Dividend payment	Decrease in cash flow
Increase in accrued expenses	Increase in cash flow

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Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

	Capable corporation	Muli-media inc
Net income	\(31,200	\)140,000
Sales	317,000	2,700,000
Total assets	402,000	965,000
Total debts	163,000	542,000
Stockholder鈥檚 equity	239,000	423,000

Sales	$900,000
Shares outstanding	50,000
Cost of goods sold	400,000
Interest expenses	40,000
Selling and administration expenses	60,000
Depreciation expenses	20,000
Preferred stock dividend	80,000
Taxes	50,000

Cash	\)163,000
Accounts receivable	889,000
Inventory	411,000
New plant and equipment	520,000
Total assets	$1,983,000

Times mirror and glass company
Sales	\(126,000
Less: Cost of goods sold	93,000
Gross profit	\)33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\(18,000
Less: Interest expenses	3,000
Earning before taxes	\)15,000
Less: Taxes (30%)	4,500
Earning after taxes	$10,500

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Short Answer

Step by step solution

Cash flow statement

Classification of the transaction as increase or decrease in the cash flows

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Increase in accounts receivable	Decrease in prepaid expenses
Increase in notes payable	Increase in inventory
Depreciation expense	Dividend payment
Increase in investment	Increase in accrued expenses
Decrease in account payable

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Identify whether each of the following items increases or decreases cash flow:Increase in accounts receivableDecrease in prepaid expensesIncrease in notes payableIncrease in inventoryDepreciation expenseDividend paymentIncrease in investmentIncrease in accrued expensesDecrease in account payable

Short Answer

Step by step solution

Cash flow statement

Classification of the transaction as increase or decrease in the cash flows

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Corporate Finance

Actuarial Science in Business

Family Business

Human 91影视

Public Relations Business Studies

Accounting

Study anywhere. Anytime. Across all devices.