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Chapter 1: Q19E-6 (page 37)

Indicate the section (O, I, or F) where each of the following transactions 1 through 8 would appear on the statement of cash flows.

O. Cash flows from operating activity

I. Cash flows from investing activity

F. Cash flows from financing activity

6. Cash received from clients

Short Answer

Expert verified

Accounts payable is a balance sheet item that shows the amount owed to the supplier and cash paid to the supplier will come under cash flow from operating activities.

Step by step solution

01

Definition of Service Revenue

The service revenue refers to the amount of money that the business receives in exchange for services provided to the clients.

02

Indication of sections

The cash received by the business from clients will come under cash flow from operating activities. Cash received from the clients will be considered as the service revenue of the business. It is a regular activity that occurs very frequently and helps in the running of the business.

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Most popular questions from this chapter

Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “−” and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (−) along with dollar amounts. The first transaction is completed as an example. Required

b. For the statement of cash flows, identify how each transaction affects cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

1 Owner invests \(800 cash in business in exchange for stock +800 +800 +800

2 Purchases \)100 of supplies on credit

3 Buys equipment for \(400 cash

4 Provides services for \)900 cash

5 Pays \(400 cash for rent incurred

6 Incurs \)200 utilities costs on credit

7 Pays \(300 cash for wages incurred

8 Pays \)50 cash for dividends

9 Provides \(600 services on credit

10 Collects \)600 cash on accounts receivable

Answer the following questions. (Hint: Use the accounting equation.)

a. At the beginning of the year, Addison Company’s assets are \(300,000 and its equity is \)100,000. During the year, assets increase \(80,000 and liabilities increase \)50,000. What is the equity at year-end?

b. Office Store has assets equal to \(123,000 and liabilities equal to \)47,000 at year-end. What is the equity for Office Store at year-end?

c. At the beginning of the year, Quaker Company’s liabilities equal \(70,000. During the year, assets increase by \)60,000, and at year-end assets equal \(190,000. Liabilities decrease \)5,000 during the year. What are the beginning and ending amounts of equity

Ford Motor Company, one of the world’s largest automakers, reports the following income statement accounts for the year ended December 31, 2015 (\( in millions). Use this information to prepare Ford’s income statement for the year ended December 31, 2015.

Selling and administrative costs . . . . . . . . . . . . \) 14,999

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,041

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,558

Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3,145

Ski-Doo Company manufactures, markets, and sells snowmobiles and snowmobile equipment and accessories. The average total assets for Ski-Doo is \(3,000,000. In its most recent year, Ski-Doo reported net income of \)201,000 on revenues of $1,400,000.

Required 4. What is the average total amount of liabilities plus equity for Ski-Doo Company?

Why is the revenue recognition principle needed? What does it demand?
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