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#1) If Cost of goods sold is $146,000 and the beginning and ending Inventory balances are...

#1) If Cost of goods sold is $146,000 and the beginning and ending Inventory balances are $18,500 and $13,500, respectively, inventory purchases equal:

A $151,000

B $141,000

C $146,000

D $132,500

#2) If Sales are $850,000 and the beginning and ending balances of Accounts Receivable are $43,000 and $48,000, respectively, the cash collected from customers is:

A - $850,000.

B - $802,000.

C - $845,000.

D - $855,000.


#3) The T-account approach:

A - may be used with the direct method.

B - creates one big T-account for cash that replaces separate schedules to show all the changes in the cash account.

C - shows cash provided as credits and cash used as debits.

D - does not determine the change in each balance sheet account.

#4) Which of the following statements about preparation of the statement of cash flows is correct?

A - GAAP allows the indirect method only.

B - GAAP allows the direct method only.

C- GAAP allows either the indirect or direct method.

D - Although GAAP allows either method for the preparation of the operating activities section of the statement of cash flows, the indirect method must be used to prepare the investing activities section of the statement of cash flows.

#5) If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500, respectively, the cash paid to employees is:

A - $450,000.

B - $433,500.

C - $448,500.

D - $451,500.

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Answer #1

1) Cost of goods sold Add: Ending Inventory Balance 146,000 13,500 159,500 Less: Beginning Inventory Balance Purchases Answer B $141,000 141,000 2) Sales 850,000 43,000 893,000 (48,000 845,000 Add: Beginning Accounts receivable Less: Ending Accounts receivable Cash Received Answer: C $845,000 B: creates one big T-account for cash that replaces separate schedules to show all the changes in the cash account. Reason: Under T-Account all the changes in cash during the period reflected either in debit or credit side according to the transaction. So it will give the reflect the closing balance of cash as well. Therefore it replaces all separate schedule C: GAAP allows either the indirect or direct method Reason: GAAP allows to choose the method of cash flow from Direct or Indirect method. Under both the method only the way ojf calculating the cash flow from operating acitivities is differ. Investing and Financing activity under both the method are same 4 Salaries and Wages expense Add: Beginning Salary and Wages payable 450,000 18,000 468,000 (16,500) 451,500 Less: Closing Salary and Wages payable Cash Paid to employee Answer D: $451,500

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