The following are the summary account balances from the statement of financial position of Granger Inc. as at October 31, 2014. The accounts are followed by a list of transactions for the month of November 2014. The following accounts have normal debit or credit balances. The amounts shown are in millions of dollars:
The following transactions occurred in November 2014:
a. Purchased new equipment costing $ 50 by issuing long- term debt.
b. Received $ 90 on trade receivables.
c. Received and paid the telephone bills for $ 1.
d. Earned $ 100 in sales to customers on account; the cost of sales was $ 60.
e. Paid employees $ 10 for salaries earned in November.
f. Paid half of the income taxes payable.
g. Purchased inventory for $ 23 on account.
h. Prepaid rent for December for a warehouse for $ 12.
i. Paid $ 10 of long- term borrowings and $ + in interest on the debt.
j. Purchased a patent (an intangible asset) for $ 8 cash.
1. Prepare a spreadsheet similar to Exhibit 5.4 . Show the effects of the November 2014 transactions on the appropriate accounts, and on the three cash flow categories.
2. Prepare a table similar to Exhibit 5.5 showing both the cash and non- cash components of revenues and expenses for November 2014.
3. Prepare the operating activities section of the statement of cash flows for Granger Inc. for November 2014 using the indirect method.
4. Compute the quality of earnings ratio for November 2014, and explain why it is different from 1.0.

  • CreatedAugust 04, 2015
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