Which of the following are shown on the Balance Sheet? Show a. Total assets b. Land c. Common Stock d. Net Change in Cash e. Revenue f. Notes Payable g. Stockholders' Equity h. Total Liabilities and Stockholders' Equity i. Expenses j. Net Income k. Ending cash balance l. Beginning cash balance m. Dividends A. a, b, c, f, g, h, k B. e, i, j C. a, b, c, f, g, h, k, m D. a, g, h Which of the following are shown on the Income Statement? a. Total assets b. Land c. Common Stock d. Net Change in Cash e. Revenue f. Notes Payable g. Stockholders' Equity h. Total Liabilities and Stockholders' Equity i. Expenses j. Net Income k. Ending cash balance l. Beginning cash balance m. Dividends A. a, b, c, f, g, h, k B. e, i, j C. d, e, i, j, m D. e, i, j, m C The stockholders reap the reward of a profitable business and suffer the consequences of losses incurred. In this case the business incurred a $60,000 loss ($120,000 Revenue − $180,000 Expenses). As a result, the stockholders would receive zero. The $60,000 loss would more than wipe out their $50,000 investment. Indeed, even the creditor would suffer a $10,000 loss. At the end of the Year 1 there would only be $35,000 cash left in the business ($50,000 from investors + $45,000 from the bank, $120,000 from revenue − $180,000 of expenses). While creditors have first priority in a business liquation, they cannot receive assets that the business does not have. In this case, even though the creditors put $45,000 in the business, they would only receive $35,000 back. While creditors get first claim on assets, they are still at risk of losing some or all of the assets loaned to a business. First claim increases security but it does not eliminate risk. Durango Company started Year 2 with beginning balances of $1,000 cash, $500 note payable, and $400 common stock. During the year, Durango generated $400 of cash revenue and $300 of cash expenses. Durango also purchased land for $900 cash. If the note payable is due on January 1, Year 3, was it a good idea to purchase the land? A. Yes, because the company was profitable in Year 2. B. No, because the company will not have enough cash to pay off the note. C. Yes, because the company can combine its ending balances from common stock and retained earnings to pay off the note. D. No, because the company does not have enough retained earnings at the end of Year 2. At the time of liquidation, Owens Company reported assets of $260,000, liabilities of $180,000, common stock of $90,000 and retained earnings of ($10,000). What amount of Fairchild's assets are the shareholders entitled to receive? A. $70,000 B. $80,000 C. $90,000 D. $160,000 Recommended textbook solutions
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Is borrowing money from a creditor an investing activity?Borrowing money from creditors is considered an investing activity on the statement of cash flows. (Financing, not investing, activities include obtaining resources from owners and providing them with a return on their investment, and borrowing money from creditors and repaying the amounts borrowed.)
What affects cash flow to creditors?How is Cash Flow to Creditors Calculated? Operating cash flow is the earnings before interest and taxes plus depreciation, minus taxes. The Cash Flow to Creditors equation reflects cash flow generated from periodic profit adjusted for depreciation (a non-cash expense) and taxes (which create a cash outflow).
How cash flow statement helps creditors?Also known as the statement of cash flows, the CFS helps its creditors determine how much cash is available (referred to as liquidity) for the company to fund its operating expenses and pay down its debts. The CFS is equally important to investors because it tells them whether a company is on solid financial ground.
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How does borrowing from creditors affect the statement of cash flows quizlet?
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