Which of the following is a cost of selling merchandise on account? Multiple Choice Uncollectible accounts expense Determining c
1 answer:
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Answer:
See explanation
Explanation:
Requirement A
See the image Below:
Requirement B
LANSBURY INC.
BALANCE SHEET
As at December 31, 2020
Assets
Cash $37,000
Accounts receivable $41,600
Investment $20,400 <em>(Note - 1)</em>
Plant asset $81,000
Less: Accumulated depreciation <u>($11,000) </u>
Book value of Plant asset $70,000
<u>Land $53,000</u>
Total assets $222,000
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $30,000
<u>Notes payable $25,000</u>
<em>Total liabilities $55,000</em>
Stockholders' Equity
Common Stock $120,000
<u>Retained earnings $ 47,000 </u>(Note - 2)
<em>Total stockholders' equity = $167,000</em>
Total liabilities & Stockholders' Equity = $222,000
<em>Note - 1:</em>
Sold investment's cost value calculation -
Selling price = $15,000
<u>Less: Gain on sale = ($3,400)</u>
Cost price = $11,600
Investment during 2019 = $32,000
<u>Sale of Investment (book value) $11,600 </u>
Remaining value of Investment = $20,400
<em>Note - 2:</em>
Beginning $23,200
Add: Net Income $32,000
<u>Less: Dividend ($8,200)</u>
Ending retained earnings = $47,000
Requirement C
1. Cash flow to net income ratio:
It shows how much cash flows from operating activities during the year over a specific net income.
We know, Cash flow to net income ratio =
Cash flow to net income ratio =
Cash flow to net income ratio = 60%
2. Operating cash flow ratio:
It shows how much cash flows from operating activities during the year from the use of current liabilities.
We know, Operating Cash flow ratio =
Operating Cash flow ratio =
Operating Cash flow ratio = 64%
Note: Here, accounts payable is the only current liabilities as notes payable has a long-term value.
