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Question 2: A company sold for $40,000 cash a machine that originally cost $90,000. The
accumulated depreciation on this machine was $47,000 at the time of the sale. What was the
company's gain or loss on this sale? (10 points)
Question 7: A company is authorized to issue 750,000 shares of $5 par value common stock.
Prepare journal entries to record the following selected transactions that occurred during the
company's first year of operations: (15 points)
Jan. 10
15
Feb. 1
Question 8: Based on the following income statement and balance sheet for Rashid
Corporation, determine the cash flows from operating activities using the indirect method.
(20 points)
Rashid Corporation
Income Statement
For Year Ended December 31, 2010
Sales
Cost of goods sold
Depreciation expense
Other operating expenses
Other gains (losses):
Gain on sale of equipment
Income before taxes
Income tax expense
Net income
$504,000
$327,600
42,000
125,500
(495,100)
7,200
$ 16,100
(4,800)
$ 11,300
Rashid Corporation
Balance Sheets
At December 31
Assets
Cash
Accounts receivable
Inventory
Equipment
Accumulated depreciation
Total assets
Liabilities:
Accounts payable
Income taxes payable
Total liabilities
Equity
Common stock
Contributed Capital in excess of par value
Retained earnings
Total equity
Total liabilities and equity
2010
$ 64,650
21,000
58,000
240,000
(106,000)
$277,650
2009
$ 55,800
29,000
52,100
222,000
( 96,000)
$262,900
$ 28,400
1,050
$ 29,450
$ 23,700
1,200
$ 24,900
$106,000
18,000
124,200
$248,200
$277,650
$106,000
18,000
114,000
$238,000
$262,900