Question

A company has a piece of land that cost $40,000. It was sold during the year for $50,000. How will this impact the Statement
Question 49 (2 points) On a Statement of Cash Flows prepared on the INDIRECT format, an increase in inventories during the ye
Question 50 (2 points) On a statement of cash flows issued for the year ending June 30, Prince Company reported NET CASH FLOW
Question 51 (2 points) The correct order of steps in the accounting cycle is to Journalize, Post, Do the Worksheet, Close, Ad
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Answer #1

Solution for question 48-

Given- Cost Price of land = $ 40,000

Selling Price of land = $ 50,000

To find- Impact on Cash Flow

Answer- Option 3

Explanation- Profit = Selling Price - Cost Price

= 50,000-40,000

= $ 10,000

Gain on sale of an asset goes into operating section of cash flow. We deduct the amount of profit ( $ 10,000) on sale in operating section.

$50,000 amount will go into Investment section to add as proceeds on sale of an asset to retire the asset.

Note- Other options are incorrect as sale of land doesn’t go into finance section and profit amount is $ 10,000. Amount $ 50,000 is inflow in investment.

Answer of question 49-

Option 2

Explanation- Increase in inventory means purchasing of inventory. To purchase anything we have to pay. So cash outflows that is why increase in inventory will be deducted in operating section.

* Other options are incorrect because increased inventory is not related with investment section as well as finance section and not an inflow of cash.

Solution of question 51-

Answer - Option 2

Explanation - Steps if accounting cycle are-

1- Journalize

2- Post into ledger

3- Unadjusted Trial Balance

4- Adjusted Entries

5- Adjusted Trial Balance

6- Financial Statements

7- Close

8- Reverse

So Option 2 is correct and other options are incorrect.

Solution of question 50-

Answer- Formula

Cash flow from operating section = Net Income + Depreciation +Increase in Accounts Payable + Decrease in Inventory- Increase in Accounts Receivable- Increase in Interest Payable

123,000 = Net Income + 38,000 + 48,000+ 27,000- 31,000-12,000

123,000= Net Income + 70,000

Net income = 123,000- 70,000

=53,000

So answer is $ 53,000

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