ACCT 101 QUIZ 11

Name:
Section No. (Circle one): G4

G5

G6

The following information relates to Equipment and related accounts of El Sheikh Corporation:
Equipment, beginning balance
Equipment, ending balance
Equipment sold during the year:

Cost
Book value
Fully depreciated equipment written off during the year
Accumulated Depreciation, beginning balance
Accumulated Depreciation, ending balance

$130,000
150,000
10,000
2,000
5,000
90,000
84,500

1) Assuming that all equipment purchases are for cash, how much cash was used to purchase equipment
during the year?
a. $21,000
b. $25,000
c. $35,000
d. $39,000

ANS: C
Equipment purchased during the year:
Use gross PPE account: $130,000 + x $10,000 $5,000 = $150,000; x = $35,000
Use net PPE account: $40,000+x-7,500(this number comes from question 2)-2,000=$65,500,
x=35,000
Fully depreciated equipment written off during the year of 5000 means that the original cost of
the equipment was 5000 and its book value was fully depreciated down to 0. The journal entry for
the write-off will be
Accumulated Depreciation
5000
Equipment
5000
In other words, the book value of the equipment before write-off was 0. There are no gains or
losses involved in this write-off.
2) Assuming that the indirect method is used, the depreciation expense that would be added to net
income in computing cash flows from operations would be
a. $4,500
b. $7,500
c. $10,500
d. $11,500
ANS: B
Depreciation expense: $90,000 + x $8,000 $5,000 = $84,500; x = $7,500
3) In 2009, Riner Company paid $5,000 to satisfy its 2008 tax liability, $32,000 for its 2006 tax liability,
and still owed taxes payable of $8,000 at year-end. How much should Riner report as a cash outflow for

tax payments on the 2009 statement of cash flows?

a. $37,000
b. $27,000
c. $40,000
d. $45,000
ANS: A
Cash outflow for tax payments: $5,000 + $32,000 = $37,000
4)Zhong Corporation's Retained Earnings balance increased by $50,000 during the year. Zhong also paid
$15,000 in cash dividends that had been declared last year and declared dividends of $20,000 for the
current year (but has not paid them at year-end). Zhong's net income for the current year must be
a. $30,000
b. $70,000
c. $65,000
d. $50,000
ANS: B
Net income: $20,000 + $50,000 = $70,000

5) An income statement and balance sheet of Bowen Company are presented below. Additional
information is also listed below.
Plant assets were acquired for
$47,000.
Common stock was issued for
$88,000.
Equipment was sold for
$35,000.
Equipment was purchased for $20,000 by executing a note payable.
A building was sold for
$31,700.
Treasury stock was sold for
$45,000.
Cash dividends of $15,000 were paid.
Depreciation expense was for equipment - $4,000, plant asset - $4,100, and building - $6,000.
Prepare the statement of cash flows using indirect method.
Bowen Corporation
Balance Sheet

Cash
Accounts Receivable
Inventory
Prepaid expenses
Equipment
Plant assets
Building

December 31, 20X6

$180,200
15,000
23,800
3,000
16,000
52,900
84,000
$374,900

December 31, 20X5

$15,000
28,600
17,000
5,700
36,400
10,000
114,500
$227,200

Accounts payable (merchandise)

Salary payable
Accrued liabilities
Income tax payable
Notes payable
Common stock
Treasury stock
Retained earnings

$37,400
5,500
15,000
3,800
117,000
138,000
0
58,200
$374,900

$16,000
4,000
19,300
3,000
97,000
50,000
(45,000)
82,900
$227,200

Answer:
Bowen Corporation
Statement of Cash Flows
For the Year Ended December 31, 20X6
Cash flows from operating activities:
Net loss
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation
Loss on sale of equipment
Gain on sale of building
Increase in inventory
Decrease in accounts receivable
Decrease in prepaid expenses
Increase in accounts payable
Increase in salary payable
Increase in income tax payable
Decrease in accrued liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of plant assets
Cash receipt from sale of equipment
Cash receipt from sale of building
Net cash provided by investing activities
Cash flows from financing activities:
Cash receipt from issuance of common stock
Cash receipt from sale of treasury stock
Payment of dividends
Net cash provided by financing activities
Net increase in cash
Cash balance, December 31, 20X5
Cash balance, December 31, 20X6

($9,700)

$14,100
1,400
(7,200)
(6,800)
13,600
2,700
21,400
1,500
800
(4,300)

37,200
27,500

($47,000)
35,000
31,700
19,700

$88,000
45,000
(15,000)
118,000
$165,200
15,000
$180,200

Noncash Investing and Financing Activities:

Acquisition of equipment by issuing note payable

$20,000

6) A company uses the indirect method to prepare the statement of cash flows. Equipment that cost
$150,000 and had accumulated depreciation of $60,000 was sold for $97,000 during the year.
a.
How much is the gain or loss on the sale?
b.
How will this transaction be presented on the statement of cash flows?
c.
How would the amount appear if the company uses the direct method to prepare the statement?
Answer:
a.
$97,000 - ($150,000 - $60,000) = $7,000 gain
b.
The transaction will appear in two places:
1.
The gain will be subtracted from net income in the operating activities section.
2.
The cash proceeds will be presented as a cash receipt in the investing activities section.
c.
The transaction will only be presented as a cash receipt in the investing activities section
7) For year 2010, the beginning balance of Bonds Payable of was 400,000, the ending balance was
600,000. The beginning balance of Discount on Bonds Payable was 52441 and the ending balance was
78249. (There is no premium on bonds payable.) On December 31, 2010, the company issued 500,000,
8yr, 4% semi-annual interest payment bonds when the market rate was 6%. There is a loss on
retirement of bond on the income statement for the amount of 20,000. (Assume all the old bonds that
are not retired are issued at par.)
a.
How much cash did the company receive from bond issuance on Dec 31, 2010?
b.
How much cash did the company paid to retire bonds during 2010?
a. Cash received is the price of the bond=500,000*(3%, 16 periods from PV of $1 table) +
500,000*2%*(3%, 16 periods from PV of annuity table)=500,000*0.62317+10,000*12.5611=437,196
There is a discount of 62,804
b. The face value of bond retired is 400,000+500,000-600,000=300,000
The discount on bonds payable belongs to the bond retired is 52441+62804-78249=36,996
Therefore, the book value of the bond right before retirement is 263,004
There was a loss of 20,000 on retirement of bond; therefore, the company had paid
263,004+20,000=283,004 to retire the bond
8) This is the owners equity part of the companys balance sheet across two years.
2010
2011
Common Shares
200,000
250,000
Additional paid in capitalcommon shares
500,000
800,000
Additional paid in capitaltreasury shares
0
2,000
Treasury stock
(55,000)
(45,000)
Retained earnings
35,200
82,900
During 2011, the company declared and paid 10,000 cash dividend and 5000 stock dividend respectively.
No treasury shares are retired during 2011.
a.
b.
c.

What is the total paid-in capital / total share capital at the end of 2011?
How much did the company earned in 2011?
How much cash does the company receive from issuing new shares?

d.

How much cash does the company receive/pay from activities related to treasury stocks?

a. 250,000+800,000+2,000-45,000=1,007,000
b. 82,900-35,200+10,000+5000=62,700
c. There is an increase of 50,000+300,000=350,000 in common shares and additional paid-in capital
common shares combined, of which 5000 is stock dividend. Therefore, the company received 350,0005,000=345,000 from issuance of stock.
d. There is a decrease of 10,000 in treasury stock and increase of additional paid in capital
Treasury shares of 2,000. Therefore, the company received 12,000 from selling of treasury stocks.