The controller for Summit Sales Inc. provides the following information on transactions that occurred during the year:
Question:
The controller for Summit Sales Inc. provides the following information on transactions that occurred during the year:
a. Purchased supplies on credit, $18,600
b. Paid $14,800 cash toward the purchase in Transaction a
c. Provided services to customers on credit, $46,925
d. Collected $39,650 cash from accounts receivable
e. Recorded depreciation expense, $8,175
f. Employee salaries accrued, $15,650
g. Paid $15,650 cash to employees for salaries earned
h. Accrued interest expense on long-term debt, $1,950
i. Paid a total of $25,000 on long-term debt, which includes $1,950 interest from Transaction h.
j. Paid $2,220 cash for 1 year's insurance coverage in advance
k. Recognized insurance expense, $1,340, that was paid in a previous period
l. Sold equipment with a book value of $7,500 for $7,500 cash
m. Declared cash dividend, $12,000
n. Paid cash dividend declared in Transaction m
o. Purchased new equipment for $28,300 cash.
p. Issued common stock for $60,000 cash
q. Used $10,700 of supplies to produce revenues
Summit Sales uses the indirect method to prepare its statement of cash flows.
Required:
1. Construct a table similar to the one shown at the top of the next page. Analyze each transaction and indicate its effect on the fundamental accounting equation. If the transaction increases a financial statement element, write the amount of the increase preceded by a plus sign (+) in the appropriate column. If the transaction decreases a financial statement element, write the amount of the decrease preceded by a minus sign (-) in the appropriate column.
2. Indicate whether each transaction results in a cash inflow or a cash outflow in the ''Effect on Cash Flows'' column. If the transaction has no effect on cash flow, then indicate this by placing ''none'' in the ''Effect on Cash Flows'' column.
3. For each transaction that affected cash flows, indicate whether the cash flow would be classified as a cash flow from operating activities, cash flow from investing activities, or cash flow from financing activities. If there is no effect on cash flows, indicate this as a noncash activity.
.png)
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
1 Effect on Accounting Equation Assets Liabilities and Equity Current Noncurren...View the full answer
