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ACC 206 Entire Course Principles of Accounting II

ACC 206 Entire Course Principles of Accounting II

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ACC 206 Entire Course Principles of Accounting II

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ACC 206 Week 1 Assignment Chapter One Problems

Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed?

Chapter 1 Exercise 1:

1. Classification of activities

Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.

a.      ________ Received $80,000 from the sale of land.

b.      ________ Received $3,200 from cash sales.

c.      ________ Paid a $5,000 dividend.

d.      ________ Purchased $8,800 of merchandise for cash.

e.      ________ Received $100,000 from the issuance of common stock.

f.       ________ Paid $1,200 of interest on a note payable.

g.      ________ Acquired a new laser printer by paying $650.

h.     ________ Acquired a $400,000 building by signing a $400,000 mortgage note.

Chapter 1 Exercise 4:

4. Overview of direct and indirect methods

Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.

a.      Both the direct and indirect methods will produce the same cash flow from operating activities.

b.      Depreciation expense is added back to net income when the indirect method is used.

c.      One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.

d.      The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.

e.      The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.

Chapter 1 Exercise 6:


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III. Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.

a. What is the product cost for the expansion product?

b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?

c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?

d. Assuming the same sales mix of these two products, what are the contribution margins and break-even points by product?

IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years:

Year 1, $15,000

Year 2, $13,000

Year 3, $10,000

Year 4, $10,000

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