COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
4th Edition
ISBN: 9781260255157
Author: Haddock
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 1MF
To determine
Comment the reason whether the owner is right to expect increase in cash due to increase in net income or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
(essay) After examining the financial statements, the owner of a small business expressed surprise that the firm's cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect cash to increase because of a substantial net income? Why or why not?
After examining the financial statements, the owner of a small business expressed surprise that the firm's cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect cash to increase because of a substantial net income? Why or why not?
Mr. Samir initiated a business by obtaining a loan from the bank. He did not calculate the required amount to start a business correctly and soon run short of cash. His expectations of monthly sales were also not met. As a result, he faced problems in paying employees' salaries, and utility bills. Due to this situation, he had to close the business after few months. What is the reason for the failure of his business?
a.
Poor cash management
b.
Poor customer service
c.
Poor business idea
d.
Poor sales
Chapter 2 Solutions
COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
Ch. 2 - What is a business transaction?Ch. 2 - Prob. 1.2SRQCh. 2 - Prob. 1.3SRQCh. 2 - Prob. 1.4SRECh. 2 - Prob. 1.5SRECh. 2 - Prob. 1.6SRACh. 2 - Prob. 2.1SRQCh. 2 - Prob. 2.2SRQCh. 2 - What information is included in the financial...Ch. 2 - Prob. 2.4SRE
Ch. 2 - Prob. 2.5SRECh. 2 - Prob. 2.6SRACh. 2 - Prob. 1CSRCh. 2 - Prob. 2CSRCh. 2 - Prob. 3CSRCh. 2 - Prob. 4CSRCh. 2 - Prob. 5CSRCh. 2 - Prob. 1DQCh. 2 - Prob. 2DQCh. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Describe the effects of each of the following...Ch. 2 - What is the fundamental accounting equation?Ch. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQCh. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 1ECh. 2 - Prob. 2ECh. 2 - Prob. 3ECh. 2 - Prob. 4ECh. 2 - Prob. 5ECh. 2 - Computing net income or net loss. The Computer...Ch. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Prob. 9ECh. 2 - Preparing a statement of owners equity and a...Ch. 2 - Analyzing the effects of transactions on the...Ch. 2 - Prob. 2PACh. 2 - Prob. 3PACh. 2 - The following equation shows the transactions of...Ch. 2 - Prob. 1PBCh. 2 - Prob. 2PBCh. 2 - Prob. 3PBCh. 2 - Prob. 4PBCh. 2 - The following account balances are for William...Ch. 2 - Richard Harris opened a gym and fitness studio...Ch. 2 - Prob. 1MFCh. 2 - Prob. 2MFCh. 2 - Prob. 3MFCh. 2 - How does an accounting system help managers...Ch. 2 - Prob. 1ED
Knowledge Booster
Similar questions
- Your managers showed you the income statement for your company. The income statement shows a net income of 5.4%, yet your manager says the company will need to borrow money to meet their financial obligations. How is this possible? Please address the following issues in your discussion this week: How can a company make a profit and still be short of cash? In accrual accounting, we record sales when they occur, not when the cash is collected. How does this affect cash flow? How does the purchase of fixed assets or additional inventory adversely affect cash flow?arrow_forwardAssume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year.arrow_forwardAssume that you are the controller of a business that provides legal services to clients. Suppose that the company has had a tough year, so the revenues have been lagging behind, based on previous years standards. What would you do if your boss (the chief executive officer [CEO] of the company) asked to reclassify a transaction to report loan proceeds of $150,000 as if the cash came from service fee revenue from clients instead. Would following the CEOs advice impact the companys accounting equation? How would reclassifying this one transaction change the outcome of the balance sheet, the income statement, and the statement of retained earnings? Would making this reclassification change the perception that users of the financial statements would have of the companys current year success and future year potential? Write a memo, detailing your willingness (or not) to embrace this suggestion, giving reasons behind your decision. Remember to exercise diplomacy, even if you must dissent from the opinion of a supervisor. Note that the challenge of the assignment is to keep your integrity intact, while also keeping your job, if possible.arrow_forward
- Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your companys year, in retrospect, as well as your vision for the companys future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?arrow_forwardBest Exports has noticed their current year net income is only $60,000. In order to get a loan from their bank to assist the business they will need to provide a statement of cash flows. In reviewing the statement of cash flows, you notice a large increase ($80,000) in accounts receivable due to two of your largest customers being behind in payments. Since the bank looks at the operating activities, this increase will create concern. You make a suggestion to reclassify the accounts receivables to long-term, thus removing them from current assets will increase the net cash from operations. Under what circumstances would this reclassification be considered ethical or unethical? Support your selection by finding an article which explains your choice.arrow_forwardKate has just completed her first year running Kate’s Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate’s Cards.Additional information:1. There were no disposals of equipment during the year. 2. Dividends in the amount of $1,300 were paid in cash during the year. 3. Prepaid expenses relate to operating expenses.Required. Prepare a statement of cash flows for Kate’s Cards for the year ended August 31, 2019, using the indirect method. Hint: Since this was Kate’s first year of operations, the beginning balance sheet account balances were zero. The second picture where it shows pink is what needs to be filled in.arrow_forward
- Assume you are the controller of a large corporation and the ceo has requested that you explain to them why the net income that you are reporting for the year is so low when the cell owes for a fact that cash accounts are much higher at the end of the year than they were at the beginning of the year write a memo to the ceo to offer some possible explanations for the disparity between financial statement net income and the change in cash during the yeararrow_forwardAssume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year.arrow_forwardYour friend, Diana Wood, recently completed the second year of her business and just received annual financial statements from her accountant. Wood finds the income statement and balance sheet informative but does not understand the statement of cash flows. She says the first section is especially confusing because it contains a lot of additions and subtractions that do not make sense to her. Wood adds, “The income statement tells me the business is more profitable than last year and that’s most important. If I want to know how cash changes, I can look at comparative balance sheets.” Required Write a half-page memorandum to your friend explaining the purpose of the statement of cash flows. Speculate as to why the first section is so confusing and how it might be rectified.arrow_forward
- PLEASE GIVE AN ANSWER TO THESE. THANK YOU! 1. What is the most possible reason why the balance of Home Office account in Lipa Branch’s book is higher than the balance of Investment in Lipa branch account in Home Office’s books?A. There is shipment to Lipa Branch from home office still in transit at the end of the year.B. Lipa Branch reported net income during the year but still unrecorded by the home office.C. The home office paid Lipa Branch’s liability without informing Lipa Branch.D. Lipa Branch failed to notify the home office about Lipa’s cash advances to Lina Branch. 2. Which of the following costs will be properly classified as prime costs?A. Factory overhead costs and direct material costsB. Direct labor costs and factory overhead costsC. Direct material costs and direct labor costsD. Indirect labor costs and indirect material costs 3. Under PFRS 15, what account will be presented by the entity in its statement of financial position where the customer has paid an amount of…arrow_forwardI need help filling out the excel template with this given information. Kate has just completed her first year of Kate's Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate's provides you with the year-end income statement and balance sheet and asks that you construct an statement of cash flows for Kate's Cards.Additional information:1. There were no disposals of equipment during the year2. Dividends in the amount of $1,300 were paid in cash during the year.3. Prepaid expenses relate to operating expenses.Requireda. Construct an statement of cash flows for Kate's Cards for the year-ended August 31, 2019, using the indirect method. Hint: Since this was Kate's first year of operations, the beginning balance sheet account balances were zero.b. Construct an statement of cash flows for Kate's Cards for the year ended…arrow_forwardAssume that you are the controller of a business that provides legal services to clients. Suppose that the company has had a tough year, so the revenues have been lagging behind, based on previous years’ standards. What would you do if your boss (the chief executive officer [CEO] of the company) asked to reclassify a transaction to report loan proceeds of $150,000 as if the cash came from service fee revenue from clients instead. Would following the CEO’s advice impact the company’s accounting equation? How would reclassifying this one transaction change the outcome of the balance sheet, the income statement, and the statement of retained earnings? Would making this reclassification change the perception that users of the financial statements would have of the company’s current year success and future year potential? Write a memo, detailing your willingness (or not) to embrace this suggestion, giving reasons behind your decision. Remember to exercise diplomacy, even if you must dissent…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning