Related questions with answers

The income statement and additional data of Value World, Inc., follow:

Value World, Inc. Income Statement Year Ended June 30, 2016

 Revenues:  Sales revenue $275,000 Dividend revenue 8,500$283,500 Expenses:  Cost of goods sold 110,000 Salary expense 60,000 Depreciation expense 22,000 Advertising expense 13,000 Interest expense 2,200 Income tax expense 8,000215,200 Net income $8,300\begin{aligned} &\begin{array}{|l|r|r|} \hline \text { Revenues: }\\ \hline \text { Sales revenue } & \$ 275,000 & \\ \hline \text { Dividend revenue } & 8,500 & \$ 283,500 \\ \hline \text { Expenses: } & & \\ \hline \text { Cost of goods sold } & 110,000 & \\ \hline \text { Salary expense } & 60,000 & \\ \hline \text { Depreciation expense } & 22,000 & \\ \hline \text { Advertising expense } & 13,000 & \\ \hline \text { Interest expense } & 2,200 & \\ \hline \text { Income tax expense } & 8,000 & 215,200 \\ \hline \text { Net income } & & \$ 8,300 \\ \hline \end{array} \end{aligned}

Additional data:

a. Collections from customers are $12,000 less than sales.
b. Payments to suppliers are$2,300 less than the sum of cost of goods sold plus advertising expense.
c. Payments to employees are $1,500 more than salary expense.
d. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
e. Acquisition of plant assets is$210,000. Of this amount, $110,000 is paid in cash and$100,000 by signing a long-term note payable.
f. Proceeds from sale of land total $29,000.
g. Proceeds from issuance of common stock total$31,000.
h. Payment of a long-term note payable is $17,000.
i. Payment of dividends is$12,500.
j. Cash balance, June 30, 2015, was $25,000.

  1. Prepare Value World, Inc.’s, statement of cash flows and accompanying schedule of noncash investing and financing activities. Report operating activities by the direct method.

  2. Evaluate Value World’s cash flows for the year. In your evaluation, mention all three categories of cash flows and give the reason for your evaluation.

Question

Listed below are eight technical accounting terms introduced in this chapter.

 Retail method  FIFO method  Lower-of-cost-or-market  Gross profit method  LIFO method  Specific identification  Flow assumption  Average-cost method \begin{array}{lll}\text { Retail method } & \text { FIFO method } & \text { Lower-of-cost-or-market } \\ \text { Gross profit method } & \text { LIFO method } & \text { Specific identification } \\ \text { Flow assumption } & \text { Average-cost method } & \end{array}

Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer "None" if the statement does not correctly describe any of the terms.
b. The only flow assumption in which all units of merchandise are assigned the same per-unit cost.

Solution

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In this problem, we are asked to indicate the technical accounting term described or to respond "None" if the statement does not accurately describe any of the terms.

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