Principles of Accounting I

Principles of Accounting II

Ashford_University_-_ACC_205_Week_2_Assignment.docx-Running head: Week Two Assignment Revenues

Chapter One Problems Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Ch 1 Critical Thinking Question 5: Answer the following questions: Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed? Noncash transactions may not exchange any cash however they are still significant investing or financing transactions/events. Noncash transactions are recorded under the noncash investing/financing activities. Chapter 1 Exercise 1: 1. Classification of activities Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity. a. ___ O _____ Received $80,000 from the sale of land. b. ____ O ____ Received $3,200 from cash sales. c. ____ F ____ Paid a $5,000 dividend. d. ____ O ____ Purchased $8,800 of merchandise for cash. e. _____ F ___ Received $100,000 from the issuance of common stock. f. ____ O ____ Paid $1,200 of interest on a note payable. g. ____ I ____ Acquired a new laser printer by paying $650. h. ____ N ____ Acquired a $400,000 building by signing a $400,000 mortgage note. Chapter 1 Exercise 4: 4. Overview of direct and indirect methods Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why. a. Both the direct and indirect methods will produce the same cash flow from operating activities. True b. Depreciation expense is added back to net income when the indirect method is used. True c. One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported. True d. The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed. False, the indirect method only shows the amount of inventory available at the time of the indirect statement of cash flow. e. The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used. True

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