Step 1:
-->Obtain balance sheets for the beginning and end of the period covered by the statement of cash flows and an income statement for that period.
Step 2:
-->Prepare a T-account worksheet
-->the top of the worksheet shows a master t account titled CASH, subdivided into 3 sections labeled operations, investing, and financing.
--> The master t-account, cash, represents the left hand side of the cash change equation (the change in cash)
-->Below the mast cash t-account, Complete the worksheet by preparing t-accounts for each liability, shareholders equity, and non cash asset account.
-->the sum of the changes in these individual t accounts expresses the right hand side of the cash change equation.
Step 3:
-->Explain the change in the master cash t-account between the beginning and end of the period by accounting for the cash effect of the change in each non-cash account during the period:
-->First, reconstruct the entries originally recorded in the accounts during the period.
-->second, classify the entries in the master account for cash as operating, investing, or financing activities.
-->the net change in all non-cash accounts provides the information needed to account for the change in cash, the left hand side of the cash change equation.
Step 4:
-->In the final step, use the information in the master T-account for cash flows to prepare a statement of cash flows 4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas1,097 explanations
1st EditionGlencoe McGraw-Hill548 explanations
9th EditionCharles T. Horngren, M Suzanne Oliver1,143 explanations
16th EditionChengyee Chang, Rod Smith, Vernon J. Richardson694 explanations
ACCOUNTINGDecorative Doors, Inc., produces two types of doors, interior and exterior. The company’s simple costing system has two direct-cost categories (materials and labor) and one indirect-cost pool. The simple costing system allocates indirect costs on the basis of machine hours. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Decorative Doors production for the most recent year follows: The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect-cost pool for Decorative Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Decorative Doors collected the following data related to the indirect-cost activities:
$$
\begin{matrix}
\text{ } & \text{Interior} & \text{Exterior}\\
\text{Units sold} & \text{3.200} & \text{1.800}\\
\text{Selling price} & \text{\$ 125} & \text{\$ 200}\\
\text{Direct material cost per unit} & \text{\$ 30} & \text{\$ 45}\\
\text{Direct manufacturing labor cost per hour} & \text{\$ 16} & \text{\$ 16}\\
\text{Direct manufacturing labor-hours per unit} & \text{1.50} & \text{2.25}\\
\text{Production runs} & \text{40} & \text{85}\\
\text{Material moves} & \text{72} & \text{168}\\
\text{Machine setups} & \text{45} & \text{155}\\
\text{Number of inspections} & \text{250} & \text{150}\\
\end{matrix}
$$
$$
\begin{matrix}
\text{Activity} & \text{Activity Cost} & \text{Activity Cost Driver}\\
\text{Production scheduling} & \text{\$ 95.000} & \text{Production runs}\\
\text{Material handling} & \text{\$ 45.000} & \text{Material moves}\\
\text{Machine setup} & \text{\$ 25.000} & \text{Machine setups}\\
\text{Assembly} & \text{\$ 60.000} & \text{Machine-hours}\\
\text{Inspection} & \text{\$ 8.000} & \text{Number of inspections}\\
\end{matrix}
$$
. Marketing costs were determined to be 3% of the sales revenue for each type of door. 1. Calculate the cost of an interior door and an exterior door under the existing simple costing system. 2. Calculate the cost of an interior door and an exterior door under an activity-based costing system. 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior door and an exterior door? 4. How might Decorative Doors, Inc., use the new cost information from its activity-based costing system to address the declining marketing share for interior doors? ACCOUNTINGBrian Ford owns a service business called Ford Lawn and Garden. Ford Lawn and Garden's general ledger accounts are given in the Working Papers. Transactions: Feb. 1. Received cash from owner as an investment, $\$11,000.00$. R1. 3. Paid cash for supplies,$\$800.00$. C1. 5. Received cash from sales, $\$1,800.00$. T5. 6. Sold services on account to Clara Walthers,$\$560.00$. S1. 9. Paid cash for rent, $\$1,200.00$. C2. 11. Paid cash for miscellaneous expense,$\$100.00$. C3. 13. Bought supp lies on account from Corner Supplies, $\$480.00$. M1. 13. Received cash from sales,$\$860.00$. T13. 16. Paid cash for advertising, $\$286.00$. C4 18. Paid cash on account to Corner Supplies,$\$280.00$. C5. 20. Paid cash for electric bill, $\$460.00$. C6.20. Received cash on account from Clara Walthers,$\$300.00$. R2.25. Paid cash for supplies, $\$300.00$. C7.27. Paid cash for supplies,$\$160.00$. CB.27. Received cash from sales, $\$4,200.00$. T27.28. Paid cash to owner for personal use,$\$1,000.00$. C9.28. Received cash from sales, $\$220.00$. T28. Prove cash. The balance on the next unused check stub is$\$13,794.00$.
