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    beginner2013's Avatar
    beginner2013 Posts: 4, Reputation: 1
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    #1

    Aug 25, 2013, 03:32 PM
    financial accounting question
    I have some questions, which I'm not sure if I got them correct.

    So I hope for some help.

    1. During 2005, P. recorded sales of $17k. How much cash did it collect from its customers?

    remark: There is a pictures of a balance sheet which shows an increased accounts receivable by $3k. And the cash increased by $7k

    -$17k
    -$14k
    -$3k
    - cannot be estimated

    I would say, normally sales means cash but the accounts receivable increase which means that something was sold on credit. That the cash only increases by $7k should be irrelevant since cashes increases and decreases not equally to sales, right? So I assume the following should be done subtract the $3k from the $17k.

    2. During 2005, S Foods, Inc. records an interest expense of $5k, and pays $2k of it in cash. How should this accounting transaction be recorded?

    -Debit interest expense $5k; credit cash $2k; credit taxes payable $3k
    -Debit interest expense $5k; credit cash $2k; credit interest payable $3k
    -Debit various debt accounts $5k; credit cash $2k; credit interest payable $3k
    -Debit interest expense $5k; credit cash $2k; credit various debt accounts $3k

    Since it is only interest cash mentioned I would assume that you book it only under this and not under various accounts, or can you do that?

    3. S. Company estimates its 2005 tax expenses to be $80k. It makes a cash payment of $20k to the tax authorities on Dec. 31, 2005. How should this transaction be recorded by S.

    -Debit Tax expenses $80k; credit cash $60k; credit taxes payable $20k
    -Debit Tax expenses $80k; credit cash $20k; credit taxes payable $60k
    -Debit Tax expenses $80k; credit cash $20k;
    -Debit Tax expenses $80k; credit cash $20k; credit accounts payable $60k

    I assumed that the estimations is used like a fact, but you usually using precise values in the balance sheet so I'm not sure if you do it like that.

    I really hope that someone can help me and I didn't get a problem with the basic understandings of accounting.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Aug 26, 2013, 06:31 AM
    You are correct in your answers.
    beginner2013's Avatar
    beginner2013 Posts: 4, Reputation: 1
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    #3

    Aug 29, 2013, 02:37 PM
    Thank you so much. That helps a lot.

    Could you help with another question as well.

    4.During 2005, Patnode had a cash outflow of $15 000 for investing activities and a cash inflow of $7 000 from financing activies. Its2005 cash flow from operation was:

    -Outflow of $15,000
    -inflow of $15,000
    -[B]Outflow of $8,000[B]
    -inflow of$8,000

    I would have said that outflow from investing and the financing activies and sum them.

    But is that correct when the questions is about the operations?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #4

    Aug 29, 2013, 04:39 PM
    You will have an Outflow of $15,000

    Financing and Investing activities are not part of the Operating activities in the Cash Flow Statement.
    beginner2013's Avatar
    beginner2013 Posts: 4, Reputation: 1
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    #5

    Sep 1, 2013, 07:36 AM
    Quote Originally Posted by pready View Post
    You will have an Outflow of $15,000

    Financing and Investing activities are not part of the Operating activities in the Cash Flow Statement.
    Thank you for your respond.

    After reading I realize a big mistake on my side, the numbers in the question are not relevant as you already pointed that out.
    Additional to the question there was a balance sheet posted, which I thought it is not relevant to answer this question, it is actually the opposite.

    After putting the numbers together from the balance sheet I got the result of having an inflow cash flow.

    Basically they confuse us with the numbers, which are given.
    I have to say without your feedback I would never understand it.

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