of Garver,Inc. provide the following information for the current Jan. 1 The fina
ID: 2599698 • Letter: O
Question
of Garver,Inc. provide the following information for the current Jan. 1 The financial statements Dec. 31 S70,000 $80,000. S110,000 $102000 $24,000 $28,000 $66,000 $64,000 $30,000 $40,000 Accounts receivable Inventory Prepaid expenses Accounts payable (for merchandise) Accrued expenses payable Net sales Cost of goods sold $520,000 $260,000 Operating eypenses (nchuding depreciation of $36,000) $160.000 5) Refer to the information above. Compute the cash received from customers during the current year 530,000 C) $510,000. D) $80,000. B) 3520,000. 7) Refer to the information above. Compute the cash payments for purchases of merchandise during the current year $266,000 B) $260,000. C) $254,000. D) $250,000. 8) A cash dividend paid to shareholders is reported on the: A) Operating activities section of the statement of cash flows. 520, B) Balance sheet. inancing activities section of the statement of cash flows. )Income statement. 0 9) Which of the following is an investing activity? A) Payment of interest 2-60 B) Issuing long-term debt. urchase of equipment. C) Issuing common stock -2, 0o o 10) Which of the following is nor a characteristic of managerial accounting? A) Information must be developed in conformity with generally accepted accounting principles or with income tax regulations B) Reports are used primarily by insiders rather than by persons outside of the business entity c) Its purpose is to assist managers in planning and controlling business operations. D) Information may be tailored to assist in specific managerial decisions. 11) Manufacturing costs do nor include: A) Direct labor applicable to production within the period. B) Selling expenses related to goods manufactured during the period. C) Manufacturing overhead charged to work in process during the period. D) Direct materials used during the periodExplanation / Answer
6. Answer: Option: A) $530,000
Cash received from customers during the year = Beginning accounts receivable + Net sales – Ending accounts receivable = $80,000 + $520,000 - $70,000 = $530,000
7. Answer: Option: A) $266,000
Cash payments for purchases of merchandise during the year = Cost of goods sold + Increase in inventory – Increase in accounts payable = $260,000 + $8,000 - $2,000 = $266,000
8. Answer: Option: C) Financing activities section of the statement of cash flows
Explanation: Financing activities include obtaining cash from shareholders and any returns of cash to shareholders and hence cash dividends paid to shareholders are reported under the financing activities section of the statement of cash flows.
9. Answer: Option: D) Purchase of equipment
Explanation: Capital expenditures are in the nature of investing activities and hence the purchase of equipment is shown under the investing activities in the statement of cash flows.
10. Answer: Option: A) Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.
Explanation: Financial accounting information is required to be in conformity with generally accepted accounting principles however, managerial accounting information is used internally for managerial decision making and planning and controlling the business operations.
11. Answer: Option: B) Selling expenses related to goods manufactured during the period.
Explanation: Selling expenses are considered as period costs and not included in manufacturing costs while the other three, direct materials, direct labor and manufacturing overheads are included in manufacturing costs.
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