Accounting 202

 

 

Homework on Accounting AC202DLU1A2017 Principles Managerial AccountingNameInstitutional Affiliation

 

 

 

 

Homework on Accounting AC202DLU1A2017 Principles Managerial AccountingWeek 1: Chapter 12: The Statement of Cash Flows Question 1In general, why do differences exist between net income and net cash provided by operating activities? Answer.Net income shows the success of failure of a business organization, there are two ways of presenting net income, the first method is using accrual basis. When accrual basis is used, net income is estimated as a result of estimation, the figure given may not be reliable; the  situation causes a difference between  net income and  net cash provided by operating activities.  Question 2Identify whether transactions constitute a “cash flow,” and then identify the cash flow activity: operating, financing, and investing.  During its first week, Duffy & Stevenson Company had these transactions.1. Issued 100,000 shares of $5 par value common stock for $800,000cash2. Borrowed $200,000 form Castle Bank, signing a 5-year note bearing 8% interest3. Purchased two semi-trailer trucks for $170,000 cash4. Paid employees $12,000 for salaries and wages 5. Collected $20,000 cash for services performedAnswer1. Is a cash flow, it is a financing activity2. Is a cash flow, it is a financing activity3. Is a cash flow, it is an investing activity4. Is a cash flow,  it is an operating activity5. Is a cash flow, it is an operating activity. Question 3: Why do companies have negative net cash provided by operating activities during the introductory phase?Answer  During the introductory phase, a business organization is still investing in assets, therefore, the company spends more money in building and purchasing productive assets, hence the cash used in operations is higher than the amount of cash generated from operations (Kimmel, Weygandt & Kieso, 2010). The situation leads to a negative net cash from operating activities. Week 1: Chapter 13Question 1

 

ReferencesKimmel,  P. D., Weygandt, J. J & Kieso, D. E. (2010) Accounting: Tools for Business Decision Making, 5th edition. New York: John Wile

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