Drexon Corp., which follows U.S. GAAP, uses the direct method to report its cash flows. The CFO
Question:
Drexon Corp., which follows U.S. GAAP, uses the direct method to report its cash flows. The CFO is assessing the impact on cash flows of 12 events during the fiscal year. Specify which category each event falls under (under THE DIRECT METHOD) and note whether it increases cash, decreases cash, or has no impact on cash:
#Event
1 Accounts payable decreases from $400,000 to $385,000.
2 An interest payment of $85,000 is made on a new debt issuance.
3 Drexon purchases a trading security which it classifies as noncurrent.
4 A gain of $8,200 is booked on the sale of an asset.
5 40,000 new shares of stock are issued near the close of the fiscal year.
6 Dividends of $12,000 are paid on Drexon company stock.
7 Capital expenditures of $35,000 are made for equipment used in day to day operations.
8 Drexon purchases 60% of a subsidiary company.
9 Depreciation and amortization expense totaling $50,000 is booked.
10 Accounts receivable decreases from $620,000 to $610,000.
11 Dividends of $6,500 are received from a stock classified as available for sale.
12 Accrued liabilities increase from $245,000 to $250,000.
My answers are below. All my answers are wrong except for the ones marked Good. Please provide the correct answers and an explanation. Thank you in advance.
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Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Event 1 2 3 4 7 Accounts payable decreases from 400000 to 385000 8 In...View the full answer
