Quality Heating Company Has the Following Liabilities at Year End

question 239

Essay

Quality Heating Company has the following liabilities at year end:
$\begin{array}{lr}\text { Notes Payable } & \$ 20,000 \\\text { Accounts Payable } & 15,000 \\\text { Unearned Contract Revenue } & 9,000 \\\text { Wages Payable } & 2,900 \\\text { Interest Payable } & 700 \\\text { Income Taxes Payable } & 1,500\end{array}$
a. Which of these accounts probably was created at the end of the fiscal year as a result of an accrual? Which probably was adjusted at year end? Explain your answer.
b. Which adjustments probably reduced net income? Which probably increased net income? Explain your answers.

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Definitions:

Noncash Financing

Financing activities that do not involve cash flows, but rather the exchange of non-cash items or liabilities, such as issuing stock for assets or converting debt to equity.

Amortization of Patents

The gradual write-off of the cost of a patent over its useful life to reflect its consumption, expiration, or decline in value.

Net Cash Flow

The amount of cash generated or lost over a specific period, taking into account cash inflows and outflows from operating, investing, and financing activities.

Statement of Cash Flows

This document details total cash inputs from a company's operational activities and investment income, alongside cash expenditures for business processes and investments over a specified period.