Question

Which of the following sections on a statement of cash flows is used to report the cash flow effects of transactions involving a company's stock?

a.Financing Activities

b.Operating Activities

c.Investing Activities

d.Profit Activities

Moore Industries began operations on January 2, 2017, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. Read the information about Moore Industries. If the company's revenues were $500,000 for the year ended December 31, 2017, how much were total expenses?

a.$640,000

b.$160,000

c.$260,000

d.$740,000

Use the five transactions below for Hennigan Rentals to answer the questions that follow.

Dec. 1		Hennigan purchases two new saws on credit at $375 each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days.
8		Hennigan accepts advance deposits for tool rentals of $75.
15		Hennigan receives a bill from Farmer's Electric Company for $150. Payment is due in 30 days.
20		Customers are charged $750 by Hennigan for tool rentals. Payment is due from the customers in 30 days.
31		Hennigan receives $500 in payments from the customers that were billed for rentals on December 20.

Refer to the transactions for Hennigan Rentals.

Based on the December 8 transaction, Hennigan will record which of the following in its accounting records?

a.A credit in Accounts Receivable for $75

b.A debit in Accounts Payable for $75

c.A credit in Accounts Payable for $75

d.A debit in Accounts Receivable for $75

Answer 1

1)	The cashflow effects of transactions involving a company's stock will be recorded under Financing activities. Under Financing activities, a company emphasises on the how the firm procures the capital required including debt.
	Answer: Option A
2)	Net income= $240000
	Revenues= $500000
	We know,
	Net income= Total revenue-Total expenses
		240000=500000-Total expenses
	Total expenses= $260000
	Answer: Option C
3)	As Hennigan Rentals is into renting business and it accepts advance deposits for tool rentals of $75 on 8th December, so the same would be recorded as a credit in Accounts receivables for $75 (as this arises out of main revenue producing activity of the concern so it would be recorded as receivables). Further it is an advance so it would be recorded as an liability so it would in turn credit the receivables balance and recorded under the head "advance received from customers".
	Answer: Option A