A Company Had the Following Transactions During the Year

question 129

Essay

A company had the following transactions during the year:
1. Paid rent for the next two years, $8,000.
2. Purchased office supplies on account, $2,400.
3. Purchased equipment, paying $12,000 cash and issuing a note payable for $4,000.
4. Borrowed from the bank, $6,000.
5. Paid employee salaries, $7,200.
6. Paid $2,000 on account related to transaction 2 above.
7. Paid dividends to stockholders, $2,800.
8. Sold land for $10,000 that was purchased in a prior year for $7,500.
9. Collected cash from customers for services provided, $25,700.
Calculate cash flows from operating activities, investing activities, and financing activities.

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Definitions:

Accrued Interest

Interest that has been earned but not yet paid, accumulating on bonds, loans, or any interest-bearing assets.

Note Receivable

A written promise for the amounts to be received within a certain period of time, which represents a right to receive payments from another entity.

Payment of Account

The process of settling an amount owed to a creditor or vendor, often referred to as making a payment on an account.

Accounts Receivable Turnover

A financial ratio that measures how many times a company collects its average accounts receivable within a period.