Cosmos Corporation Was Established on December 31,2010,by a Group of Investors

question 101

Essay

Cosmos Corporation was established on December 31,2010,by a group of investors who invested a total of $1,000,000 for shares of the new corporation's stock.During the month of January,2011,Cosmos provided services to customers for which the total revenue was $100,000.Of this amount,$10,000 had not been collected by the end of January.Cosmos recorded salary expense of $20,000,of which 90% had been paid by the end of the month; rent expense of $5,000,which had been paid on January 1; and other expenses of $12,000,which had been paid by check.On January 31,2011,Cosmos purchased a van by paying cash of $30,000.There were no other transactions that affected cash.
Requirements:
1.In which section of the statement of cash flows would the amount of cash paid for rent be reported?
2.In which section of the statement of cash flows would the amount of cash paid for the van purchase be reported?
3.By how much did Cosmos's cash increase or decrease during January,2011?
4.What was Cosmos's net income or net loss (after income tax expense)for the month of January,2011? The income tax rate was 30%.
5.Explain why the net increase or decrease in cash for a business generally will be different than the net income,or net loss,for the same period.

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Definitions:

Stanford Prison Study

An infamous psychological experiment conducted in 1971 by Philip Zimbardo, examining the effects of perceived power, focusing on the struggle between prisoners and prison officers.

Behavior

The way in which one acts or conducts oneself, especially towards others.

Dispositional Attributions

The tendency to attribute someone's behavior to their personality or character rather than to situational factors.

Situational Attributions

The process of explaining someone's behavior based on external factors, such as the situation or environment.