AC 310 Lab Problems

Cash Flow Practice 10.5.2021

1. Green Company made $5,000,000 of sales to customers on account during 2020. During
the same year, Accounts Receivable increased by $10,000. How much cash did Green
Collect from customers?
Sales revenue 5,000,000
Less: increase in AR (10,000)
Cash collected 4,990,000

2. Yellow Company collected $600,000 of cash from credit customers during 2020, and the
Accounts Receivable balance increased during the year by $20,000. If the beginning
balance in Accounts Receivable was $40,000, then what would Yellow report as Sales
Revenue for 2020?
Cash collected: 600,000
Add: increase in AR 20,000
Sales Revenue 620,000

3. Salaries Payable for Blue, Inc. increased by $5,000 during the first quarter of 2021.
During this time, Salaries Expense reported was $315,000. How much did Blue pay for
Salaries in the first quarter of 2021?
Salaries Expense 315,000
Less: increase in payable (5,000)
Cash paid for salaries 310,000
AC 310 Lab Problems
Cash Flow Practice 10.5.2021
4. Magenta Company sold a Building to Colorful, Inc. for $8,000,000 on March 5, 2021.
The Building originally cost Magenta $10,000,000, and the company recorded a
$1,000,000 gain on sale of the building. Prepare the journal entry for the sale and
describe how this will be presented in Magenta’s 2021 Statement of Cash Flows.
Sales Price: 8 Cost: 10
Less BV: (7) Less Acc Dep: (3)
Gain/(loss): 1 Book Value: 7

Cash 8
Acc Dep 3
Building 10
Gain 1

Proceeds from sale of equipment 8 (investing section)

5. Retained Earnings for Orange, Inc, was $5,000 on January 1, 2020. Orange had Net
Income (after taxes) of $45,000, and the Retained Earnings Balance was $30,000 after
closing entries were made for December 31, 2020. During this time, the Dividends
Payable account also increased by $20,000. How much cash will Orange report in the
financing section of the cash flow statement as “Cash Paid for Dividends”?

Beginning RE 5,000
+ Net Income 45,000
- Dividends (20,000)
= Ending RE 30,000
No cash is paid for dividends since the dividends payable account increased by the same amount
as the dividends declared.
6. Retained Earnings for Orange, Inc, was $5,000 on January 1, 2020. Orange had Net
Income (after taxes) of $45,000, and the Retained Earnings Balance was $30,000 after
closing entries were made for December 31, 2020. How much cash will Orange report in
the financing section of the cash flow statement as “Cash Paid for Dividends”?
Cash paid for dividends (20,000)
AC 310 Lab Problems
Cash Flow Practice 10.5.2021