Question

1. Electroyo Corporation's accumulated depreciation increased by $8,500, while patents decreased by $2,800 between consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $5,350 from sale of land. Net income is $68,000. Determine the net cash flow from operating activities. 2. The net income reported on the income statement for the current year was $310,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,00o, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: End Beginning 50,000 60,000 108,000 93,000 6,500 89,000 Cash Accounts receivable Inventories Prepaid expenses Accounts payable (merchandise creditors) 112,000 105,000 4.500 75,000 What is the amount of cash flows from operating activities reported on the statement of cash flows? 3. ASE Company sold goods, receiving $35,000 in cash and $15,000 on credit. How much revenue should it record under the accrual basis of accounting? 4. ASE Company sold goods, receiving $35,000 in cash and $15,000 on credit. How much revenue should it record under the cash basis of accounting? 5. On June 1, Unidevo, Inc. purchased $1,700 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Unidevo, it is determined that $800 of supplies still remain. What is the balance in the supplies account after adjustment?

Answer 1

Solution 1 :- Calculation of Net cash flow from operating activities :-

Net Income	$ 68000
Adjustments to Reconcile Net income :
Add : Increase in accumulated depreciation ( W Note 1)	$ 8500
Add : Decrease in the value of Patents ( W Note 2)	$ 2800
Less : Gain from sale of land	($ 5350)
Net cash flow from operating activities	$ 73950

W Note 1 :-Since there were no purchases or sales of depreciable assets , therefore increase in accumulated depreciation represents current year depreciation which will be added while calculating cash flow from operating activities.

W Note 2 :-Since there were no purchases or sales of intangible assets , therefore decrease in patents represents amortization of patents which will be added while calculating cash flow from operating activities.

2 :- Calculation of Net cash flow from operating activities :-

Net Income	$ 310000
Adjustments to Reconcile Net income :
Add :Depreciation on fixed assets	$ 40000
Add : Amortization of Patents	$ 9000
Operating Profit before working capital changes	$ 359000
Changes in Working Capital :-
Increase in Account Receivable	($ 4000)
Increase in Inventory	($ 12000)
Decrease in Prepaid Expenses	$ 2000
Decrease in Account Payable	($ 14000)
Net cash flow from operating activities	$ 331000

3. Under Accrual basis of accounting , ASE company should record $ 50000 revenue. Because under accrual basis , all sales whether on cash basis or credit basis are recorded. Therefore , ASE company should record $ 50000 revenue ( $35000 in Cash and $ 15000 on Credit ).

4. Under Cash basis of accounting , ASE company should record $ 35000 revenue. Because under cash basis , only cash sales are recorded. Therefore , ASE company should record $ 35000 revenue ( $35000 in Cash ).