# Financial Reporting And Analysis - Financial Reporting And Analysis Section 2

>>>>>>>>Financial Reporting And Analysis Section 2

 Net revenue \$200,000 Gross profit \$50,000 Increase in inventory \$8,000 Increase in accounts payable \$12,000

• A

\$146,000  • B

\$154,000.  • C

\$170,000.  • Option : A
• Explanation : Cash paid to suppliers = Cost of goods sold + increase in inventory - increase in payables. Cash paid to suppliers = 200,000 - 50,000 + 8,000 - 12,000 = \$146,000.

• A

110,000.  • B

120,000.  • C

130,000.  • Option : C
• Explanation : The cash paid to suppliers is 120,000 + 50,000 – 40,000 = 130,000.

• A

\$7,000  • B

\$9,000  • C

\$25,000  • Option : A
• Explanation : Salary payable = Beginning salary payable + Salary expense - Cash paid Salary payable = 16,000 + 40,000 - 49,000 = 7,000.

• A

\$6 million.  • B

\$18 million.  • C

\$22 million.  • Option : A
• Explanation : Cash paid = Operating expenses - decrease in prepaid expense - increase in accrued expense Cash paid = 20 - 6 - 8 = 6.

 2011 2012 Machinery \$80 million \$91 million Accumulated depreciation \$25 million \$31 million

Further information provided is as follows:

 Gain on sale of machinery \$1.5 million Depreciation expense for 2012 \$7 million Capital expenditure on machinery \$14 million
How much did the company receive in cash from the sale of machinery?

• A

\$2 million  • B

\$2.5 million  • C

\$3.5 million  • Option : C
• Explanation : Gain = Selling Price - Book Value

Historical cost:
Beginning value of machinery + machinery bought – machinery sold = Ending value of machinery 80 million + 14 million – 91 million = 3 million
Machinery sold = 3 million

Accumulated depreciation:
Beginning value of depreciation + depreciation expense – machinery depreciation = Ending value of depreciation 25 million + 7 million – 31 million = 1 million
Machinery depreciation = 1 million

Book value:
Book value = Historical cost – accumulated depreciation
Book value = 3 - 1 = 2 million
Selling price:
Selling price = Gain + Book Value
Selling price = 1.5 million + 2 million = 3.5 million.