Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 1 The Role of Accounting in Business 35

Financial information related to Derby Interiors for October and November 2006 is as follows:

October 31, 2006 November 30, 2006

Accounts payable $12,320 $13,280

Accounts receivable 27,200 31,300

Capital stock 15,000 15,000

Retained earnings??

Cash 48,000 81,600

Supplies 2,400 2,000

a. Prepare balance sheets for Derby Interiors as of October 31 and as of November 30, 2006.

b. Determine the amount of net income for November, assuming that no additional capital

stock was issued and no dividends were paid during the month.

c. Determine the amount of net income for November, assuming that no additional capital

stock was issued but dividends of $10,000 were paid during the month.

Each of the following items is shown in the financial statements of ExxonMobil Corporation.

Identify the financial statement (balance sheet or income statement) in which each item would

appear.

a. Accounts payable i. Marketable securities

b. Cash equivalents j. Notes and loans payable

c. Crude oil inventory k. Operating expenses

d. Equipment l. Prepaid taxes

e. Exploration expenses m. Retained earnings

f. Income taxes payable n. Sales

g. Investments o. Selling expenses

h. Long-term debt

Indicate whether each of the following cash activities would be reported on the statement of cash

flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity.

1. Sold excess office equipment 6. Paid for advertising


2. Paid rent 7. Paid officers’ salaries


3. Paid for office equipment 8. Issued a note payable


4. Issued capital stock 9. Paid rent


5. Sold services 10. Paid dividends

Indicate whether each of the following activities would be reported on the statement of cash

flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity.

1. Cash received from fees earned


2. Cash paid for land


3. Cash received from investment by stockholders


4. Cash paid for expenses

Hoist Inc. was organized on March 1, 2007. A summary of cash flows for March is shown below.

Cash receipts:

Cash received from customers $ 37,600

Cash received for capital stock 144,000

Cash received from note payable 16,000

Cash payments:

Cash paid out for expenses $ 13,360

Cash paid out for purchase of equipment 120,000

Cash paid as dividends 8,000

Prepare a statement of cash flows for the month ended March 31, 2007.

Exercise 1-16

Balance sheets, net income

Goal 4

b. $36,340

Exercise 1-17

Financial statements

Goal 4

Exercise 1-18

Statement of cash flows

Goal 4

Exercise 1-19

Statement of cash flows

Goal 3

Exercise 1-20

Statement of cash flows

Goal 4

Net cash flows from
operating activities, $24,240