.11 Sprint 4:57 PM 99% mail-attachment.googleuser C 21. The following informatio
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Question
.11 Sprint 4:57 PM 99% mail-attachment.googleuser C 21. The following information pertains to Alpha Computing at the end of 2017: Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2017 What amount of dividends did the company pay in 2017? A. $280,000 B. S150,000 C. S30,000. D. $80,000 22. In the operating activities section of the statement of cash flows, we start with net income when using: A. the direct method. B. the indirect method. C. both the direct and the indirect method. D. neither the direct nor the indirect method. 23. Which of the following would be classified as an operating activity on the statement of cash flows using the direct method? A. Cash dividends paid B. Cash received from selling equipment C. Cash paid to retire bonds payable at maturity D. Cash received from accounts receivable collections 24·The account entitled Premium on Bonds Payable: A. increases when amortization entries are made. B. appears on the balance sheet of the issuer as a deduction from bonds payable. C. decreases when amortization entries are made and its balance is equal to zero at the maturity date of the bond D. is a contra account with a normal debit balanceExplanation / Answer
21. What amount of dividends did the company pay in 2017?
Answer: Option D. $80,000
Explanation:
Dividend can be paid from Retained earning up to positive balance of retained earnings. In present case
Closing Balance of Retained Earning = Opening Balance + Net Income of current year
= $0 + $90,000 = $90,000
So Company can pay maximum Dividend up to $90,000
22. In the operating activities section of the statement of cash flows, we start with net income when using:
Answer: Option B. the indirect method
Explanation: The indirect method begins with net income and adds and subtracts adjustments to obtain cash flow from operating activities.
23. Which of the following would be classified as an operating activity on the statement of cash flows using direct method?
Answer: Option D. Cash Received from accounts receivable collection
Explanation: The direct method to calculate cash flow from operating activities involves determination of various types of cash receipts and payments such as cash receipts from customers, cash paid to suppliers, cash paid for salaries, etc. and then putting them together under the cash flow from operating section of cash flow statement.
24. The account entitled Premium on Bonds Payable:
Answer: Option C) decreases when amortization entries are made and its balance is equal to zero at the maturity date of the bond.
Explanation
The unamortized premium on bonds payable and the unamortized discount on bonds payable will be presented with the related bonds as liabilities on the balance sheet.
The unamortized premium on bonds payable will have a credit balance that increases the carrying amount (or the book value) of the bonds payable.
On the maturity date, the balance in the Premium on Bonds Payable or Discount on Bonds Payable account will be zero and the carrying value of the bond will be face value.
A premium account is an adjunct account, and a discount account is contra account.
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