During 2011, Eaton sold some equipment for $16 that had cost $46 and on which there was accumulated depreciation of $27. In addition, the company sold long-term investments for $44 that had cost $39 when purchased several years ago. A cash dividend was paid during 2011 and the company repurchased $80 of its own stock. Eaton did not retire any bonds during 2011.
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This solution illustrates how to convert an income statement from accrual basis to cash basis and how to prepare a statement of cash flows using the direct method.
GAAP-adjusting of accounts,accrual vs cash basis
State two generally accepted accounting principles that relate to adjusting the accounts.
3. Rick Marsh, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Marsh's law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
4. Why do accrual-basis financial statements provide more useful information than cash-basis statements?
8. Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each categoryView Full Posting Details