Question

Kelly Company, a small corporation, is preparing its 2016 financial statements. At the end of 2016,...

Kelly Company, a small corporation, is preparing its 2016 financial statements. At the end of 2016, the company purchased a building for $100,000, paid $20,000 as a down payment, and signed an $80,000 mortgage. Kelly's president is concerned about how to report this transaction on the company's statement of cash flows and has asked you to “look into this issue for me.” Research the related U.S. GAAP using the FASB's Accounting Standards Codification and prepare a short memo to the president that summarizes how to report this transaction on the 2016 statement of cash flows. Cite your reference and applicable paragraph numbers. Include ASC 230 with recent updates and explain why industry-specific subtopic guidance is so extensive with specific examples

0 0
Add a comment Improve this question Transcribed image text
Answer #1
  • At the end of 2016, the company purchased a building for $100,000, paid $20,000 as a down payment, and signed an $80,000 mortgage.

According to FASB 230-10-45-11 the above shall be reported as cash flows from investing activities:

  1. Cash flow from investing activities will decrease by $20,000 as purchasing of building is an investment activity.

Cash used for purchase of Building ($20,000)

Under US GAAP we only report those activities on the statement of cash flows that affect cash. Para ASC 230-10-50--3 requires that Activities that have no impact on cash are known as ‘non-cash financing activities’ and are disclosed in the foot notes under the caption ‘non-cash investing and financing activities’. Hence, balance $80,000 will be disclosed in foot notes under ‘non-cash investing and financing activities as "Purchase of Buildings by incurring a mortgage to the seller" (ASC 230-10-50--4).

Add a comment
Know the answer?
Add Answer to:
Kelly Company, a small corporation, is preparing its 2016 financial statements. At the end of 2016,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • 3.You are the accountant for a small manufacturing firm. Your company is privately held, so there is no current requirement to issue financial statements using GAAP. You were hired four years ago, and...

    3.You are the accountant for a small manufacturing firm. Your company is privately held, so there is no current requirement to issue financial statements using GAAP. You were hired four years ago, and at that time you instituted a cash budgeting system. Presently, you prepare anincome statement, statement of retained earnings, balance sheet and departmental budgets. Jake Griffith, the company's president, has asked whether a statement of cash flows would also be useful.Required: Prepare a short memorandum to the president...

  • Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial...

    Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial statements are complete except for the statement of cash flows. You have been asked to prepare a statement of cash flows for the year ended June 30, 2017. Download the Excel spreadsheet Booster Company A1. Required: 1. Prepare a spreadsheet to support a statement of cash flows for the year ended June 30, 2018. 2. In the Excel Worksheet column named Worksheet Entries', show...

  • Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial...

    Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial statements are complete except for the statement of cash flows. You have been asked to prepare a statement of cash flows for the year ended June 30, 2017. Download the Excel spreadsheet Booster Company A1. Required: Prepare a spreadsheet to support a statement of cash flows for the year ended June 30, 2018. In the Excel Worksheet column named ‘Worksheet Entries’, show under Debit...

  • Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial...

    Booster Company is preparing its financial statements for the year ended June 30, 2018. The financial statements are complete except for the statement of cash flows. You have been asked to prepare a statement of cash flows for the year ended June 30, 2017. Booster Company A1 Company Facts: PLEASE FILL IN THE BELOW CHARTS FOR THE ASSIGNMENT:------------------------------------------------------------------ Account Balances June 30, 2017 June 30, 2018 Debits $ $ L 361,700 100,000 11,700 1,500 168,750 45.000 Cash Accounts Receivable Marketable...

  • Patel, CPA, has completed the audit of the financial statements of Bellamy Corporation as of and...

    Patel, CPA, has completed the audit of the financial statements of Bellamy Corporation as of and for the year ended December​ 31, 2016. Patel also audited and reported on the Bellamy financial statements for the prior year. Patel drafted the following report for 2016: We have audited the balance sheet and statements of income and retained earnings of Bellamy Corporation as of December​ 31, 2016. We conducted our audit in accordance with generally accepted accounting standards. Those standards require that...

  • Give at least two points that a working accountant will find useful (using complete sentences). THE...

    Give at least two points that a working accountant will find useful (using complete sentences). THE BOTTOM Changes to Revenue Recoqnition Requirements By Quinn R. Martin, Matthew J. Frazier and Michael J. Devereux Revenue is considered one of the most important financial statement measures. It is used to assess a company's past financial performance, fut ure growth potential and finan- cial well-being. This makes revenue recognition one of the accounting topics most scrutinized by business owners. The Accounting Standards Codification...

  • Refer to the following financial statements and answer the following questions hints:- 13. cash provided (used)...

    Refer to the following financial statements and answer the following questions hints:- 13. cash provided (used) by operating activities, investing activities, and financing activities. 14. cash-based net income. 15. estimate of uncollectible accounts receivable. 16. calculate and interpret accounts receivable ratio (most recent and prior period). hints:- 2:12 PM Wed Apr 15 39%). A 51.04cdn.com PART II NIKE, Inc. Consolidated Statements of Income in mWors, except per share data) Revenues Cost of sales Gross profit Demand creation expense Operating overhead...

  • JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per...

    JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per Share Amounts) (Note 1)* 2016 71,890 21,789 50.101 20,067 9.143 29 Sales to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research and development expense In-process research and development Interest income Interest expense, net of portion capitalized (Note 4) Other (income) expense, net Restructuring (Note 22) Eamings before provision for taxes on income Provision for taxes on income (Note 8)...

  • JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per...

    JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per Share Amounts) (Note 1)* 2016 71,890 21,789 50.101 20,067 9.143 29 Sales to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research and development expense In-process research and development Interest income Interest expense, net of portion capitalized (Note 4) Other (income) expense, net Restructuring (Note 22) Eamings before provision for taxes on income Provision for taxes on income (Note 8)...

  • JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per...

    JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and Shares in Millions Except Per Share Amounts) (Note 1)* 2016 71,890 21,789 50.101 20,067 9.143 29 Sales to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research and development expense In-process research and development Interest income Interest expense, net of portion capitalized (Note 4) Other (income) expense, net Restructuring (Note 22) Eamings before provision for taxes on income Provision for taxes on income (Note 8)...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT