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beginner2013
Aug 25, 2013, 03:32 PM
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
Aug 26, 2013, 06:31 AM
You are correct in your answers.

beginner2013
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
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
Sep 1, 2013, 07:36 AM
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.