The Following Ten Items Are Independent of Each Other

question 47

Essay

The following ten items are independent of each other.For each item,indicate the amount of any cash flow that occurs or state that no cash flow resulted from the item.
1.Prepaid rent decreased $20,000 during the year.Rent expense recognized for the year amounted to $30,000.
2.Patent amortization recognized amounted to $30,000.
3.Net income was $100,000; retained earnings increased $60,000; and dividends payable decreased $20,000.
4.Wages payable decreased $12,000 and wages expense for the year amounted to $48,000.
5.The balance in accounts receivable at the beginning of the year was $600,000,and at the end of the year was $175,000.Sales for the year were $1,000,000.The balance of the allowance for doubtful accounts was $20,000 at the beginning of the year and $35,000 at the end of the year.Bad debt expense for the year was $40,000.
6.Sales on account for the year are $1,000 and the balance in accounts receivable increased $200 during the year.All sales are on account.
7.Sale at a gain of $500 of a plant asset costing $4,000 with $2,500 of accumulated depreciation.
8.The balance in accumulated depreciation increased $10,000 for the year.No disposals of plant assets occurred during the year.
9.At the beginning of the fiscal year,merchandise inventory amounted to $30,000.A physical count at year-end showed $37,000 worth of inventory on hand.The balance of accounts payable at the beginning of the fiscal year was $26,000 and at the end of the fiscal year was $30,000.Cost of goods sold for the fiscal year was $42,000.The company uses a perpetual inventory system.
10.The retained earnings account decreased $10,000.Net income for the fiscal year was $15,000.Dividends payable decreased $10,000.

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Definitions:

Autonomous C

Spending by consumers that does not depend on current income levels, such as basic needs or contractual obligations.

Disposable Income

The budget households have for saving and spending activities after income taxes deductions.

Induced Consumption

Consumer spending that increases as income rises, and decreases when income falls, reflecting a direct relationship between income and consumption.

Consumption Function

An economic formula that represents the relationship between total consumption and gross national income.