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Q14-7SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 770

Short Answer

Question: Computing investing and financing cash flows Preston Media Corporation had the following income statement and balance sheet for 2018:

PRESTON MEDIA CORPORATION

Income Statement

Year Ended December 31, 2018

Sales Revenue $80,000

Depreciation Expense––Plant Assets $11,000

Other Expenses $50,000

Net Income $19,000

Requirements

1. Compute the acquisition of plant assets for Preston Media Corporation during 2018. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets.

2. Compute the payment of a long-term note payable. During the year, the business issued a $4,400 note payable.

Answer

Requirement (1): cash paid to purchase new plant is $21,000.

Requirement (2): Payment of a long-term note payable is $7,400.

See the step by step solution

Step by Step Solution

Step 1: (Requirement 1.) Computation of acquisition of plant assets for Preston Media Corporation during 2018

Particulars

Amount ($)

Plant assets (31st December, 2018)

105,350

Plant assets (31st December, 2017)

(84,350)

Cash paid to purchase new plant

21,000

Step2: (Requirement 2.) Computation of the payment of a long-term note payable

Particulars

Amount($)

Particulars

Amount($)

Payment

7,400

Opening balance (31/12/2017)

12,000

Closing balance (31/12/2018)

9,000

New issuance

4,400

Total

16,400

Total

16,400

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