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Accounting: Equity statement, Cash flow analysis

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Please use separate excel document to answer all questions. Clearly identify negative numbers.

1. on June 23, 2008 Lennar Cosmetics sold $250,000 worth of products to Bynum, with the payment to me made in 90 days on September 20. The goods were shipped to Bynum on July 2. When should the sale should be recognized on:

- June 23, 2008
-July 2, 2008
-September 20, 2008
-none of the above

2. During the last year, Sigma Co had Net income of $148, paid $17 in dividends, and sold new stock for $39. Beginning equity for the year was $610. What was Ending Equity?

3. The following are components of a traditional balance sheet. How much are the total assets of the firm?

Plant & Equipment = $40,800
Common Stock = $15,000
Cash = $5,500
Inventory = $21,700
Bad Debt reserve = $6,000
Paid in excess = $6,000
Accumulated depreciation = $27,000
Accounts receivables = $22,000

4. Brit Corp. bought an oil rig exactly 6 years ago for $113, 000,000. Brit depreciated oil rigs straight line over 10 years assuming no salvage value. (Straight line depreciation means that the yearly depreciation will be purchase price of the oil rig divided by the number of years it will last, which is 10 years here.) The rig was just sold to Cornish Petroleum for $25,000,000. What Capital Gain/Loss will Brit report on this transaction?

5. Ryder Corp. conducted the following activities during 2001: (1) sold $10,000 shares of their own stock for $17.00 per share; (2) they issued bonds for which they received $493,000; (3) they paid dividends to their stockholders totaling $82,000; (4) they sold a piece of equipment for $50,000 that they were carrying on their books for $20,000; (5) they earned net income of $140,000. What would be shown on the Statement of Cash Flows for "Cash from Financial Activities" based on the information above?

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Solution Summary

The problem set deals with issues under accounting: Total assets calculation, equity at year-end and accural concept.

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1. On June 23, 2008 Lennar Cosmetics sold $250,000 worth of products to Bynum, with the payment to me made in 90 days on September 20. The goods were shipped to Bynum on July 2. When should the sale be recognized?
a. June 23, 2008
b. July 2, 2008
c. September 20, 2008
d. none of the above
Accounting practice dictates that the accrual method be implemented at all times. The accrual method simply recognizes events at the date when they occur instead of when cash is actually paid.

2. During the last year, Sigma Co had Net income of $148, paid $17 in dividends, and sold new stock for $39. Beginning equity for the year was $610. What was ending Equity?
Equity: Opening ...

Solution provided by:
Chidi Ngene, M. Sc.
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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