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Record the Journal Transaction with discount amount with Gross Method and Net Method

by | May 24

Question No. 1 (6 Marks)
The major classifications of activities reported inthe statement of cash flows are Operating (O), Investing (I), and Financing (F). Classify each of the transactions listedbelow as:
1. Operating activity—add to net income.
2. Operating activity—deduct from net income.
3. Investing activity.
4. Financing activity.
5. Reported as significant non-cash activity in the notes to the financial statements.
The transactions are as follows.

Transactions
Activity (O, I, F)
ADD or LESS + or –

Issuance of ordinary shares.
 
 

Purchase of land and building,
 
 

Redemption of bonds,
 
 

Sale of equipment
 
 

Depreciation of machinery.
 
 

Issuance of bonds for plant assets,
 
 

Payment of cash dividends,
 
 

Exchange of furniture for office equipment.
 
 

Purchase of treasury shares.
 
 

Loss on sale of equipment.
 
 

Increase in accounts receivables during the year,
 
 

Decrease in accounts payable during the year.
 
 

Question No. 2: (9 Marks)

Abbey INC.

Balance Sheet

Assets
Dec. 31, 2010
Jan. 1, 2010
Inc./Dec.

Equipment
$39,000
$22,000
$17,000 Inc.

Less: Accumulated depreciation
-17,000
$ (11,000)
6,000 Inc.

Accounts receivable
91000
88,000
3,000 Inc.

Cash
45,000
13,000
32,000 Inc.

Total
$158,000
$112,000
 

Equity and Liabilities
 
 
 

Share capital—ordinary
100000
$80,000
20,000 Inc.

Retained earnings
38,000
17,000
21 ,OOO Inc.

Accounts payable
20,000
15,000
5,000 Inc.

Total
$158,000
$112,000
 

Net Income of $34000 was reported and Dividend of $13000 were paid in 2010. New Equipment was purchased and none was sold.
Requirement:
Prepare Statement of Cash Flow for the year 2010.
Question No. 3: (10 Marks)
A Comparative Statement of Financial Position for Vivaldi Corporation is given below;

 
Dec-31

Assets
2010
2009

Land
$71,000
$110,000

Equipment
270,000
200,000

Accumulated depreciation—equipment
-69,000
-42,000

Inventories
180,000
189,000

Accounts receivable
82000
66,000

Cash
63,000
22,000

Total
$597,000
$545,000

Equity and Liabilities
 
 

Share capital—ordinary ($1 par)
$214,000
$164,000

Retained earnings
199,000
134,000

Bonds payable
150,000
200,000

Accounts payable
34,000
47000

Total
$597,000
$545,000

Additional Information
1. Net Income for 2010 was $105000
2. Cash Dividend of $40000 were declared and paid
3. Bonds payable amounting to $50000 were retired.
Requirement:
Prepare Statement of Cash Flow for the year 2010.
Question No. 4: (5 Marks)
Smart Co Sales made on credit. On July 1, 2018 it made sales of $60 000 with the term 3/10, n/30. On July 9, 2018 Smart Co received $30000 payment for July 1 sales. Remaining Payment received by smart Co on 15th July, 2018.
Requirement:
Record the Journal Transaction with discount amount with Gross Method and Net Method

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