Assignment 2 by Hamid Karim

P4-9

1 cash 62000
Deferred revenue 7000
Trades recievable 55000

Recieved 55000 and 7000 in advance totaling 62000

Defferd revenue 5500

Service revenue 5500

To recognice revenue that was collected in advance 3000+7000-4500

Trades recievable 40000

Service revenue 40000

59000+X-55000=44000
x=40000

2 Rent expense 980

Prepaid rent 980

3 Prepaid insurance 15840

cash 15840

One year insurance times 10%

1200 x 12 months x 1.10

4 interest Expense 100

Interest payable 100

5 Advertising expense 780

Trades payable 780

6 Supplies inventory 4300

Supplies Expense 4300

Unused supplies= 11500-7200

AP4-3
Required
1 a. Deffered expense
b. accrued revenue
c. Deffered expense
d. Accrued expense
e. Defferred expense
f. defferred expense
g. accrued revenue
h. Accrued expense
 Required
2 a. Supplies expense 1250
Supplies inventory 1250

b. Trades recievables 7500

Sales revenue 7500

c. insurance expense 200

prepaid insurance 200

d. Repairs & maintenance 600

Accrued liabilities 600

e. Rent expense 700

Prepaid rent 700

f. Depreciation expense 2600

Accumulated depreciation 2600

g. Interest recievable 20
Interest revenue 20

h. Income tax expense 7371

Income tax payable 7371

Priop earnings 22400

adjustments 2170 (-1250+7500-200-600-700-2600+20)
24570
Income tax rate 30%
Income tax expense 7371

Required
3 Transaction Assets Liabilities Shareholder's
Revenues
equity Expenses Net Earning
a -1200 N -1250 N 1250 -1250
b 7500 N 7500 7500 N 7500
c -200 N -200 N 200 -200
d N 600 -600 N 600 -600
e -700 N -700 N 700 -700
f -2600 N -2600 N 2600 -2600
g 20 N 20 20 N 20
h N 7371 -7371 N 7371 -7371

P5-5
Required
1
Laporte Inc.
Statement of Cash Flows
For the year Ended Dec 31 2020
 Net Earninga $12
Add or deduct items not affecting cash

Depreciation Expense $10

Gain on sale of investments -$6
Loss on sale of equipment $2
Increase in accounts recievable -$10
Decrease in merchandise inventory $4
decrease in accounts payable -$14
Decrease in income tax payable -$1
Net cash used for operating activitie -$3

2
Laporte Inc.
Statement of Cash Flows
For the year Ended Dec 31 2020

Cash flows from investing activities

Purchase of equipment -$22

Sale of equipment 10
Sale of long-term investments $24
Net cash flow from investing activities $12

3
a Quality of earnings ratio= cash flow from operations/Net Earnings
Quality of earnings ratio= -$3/12
Quality of earnings ratio= -0.25

The quality of earnings ratio measures the eanings that were earned in cash. This ratio
shows the signaficant differences between net earnings and operating cash flows
In this scenario we have a negative due to depreciation expense and sales that have not been collected.

b Capital expendetures ratio= cash flow from operations/cash paid for capiital expenditures
Capital expendetures ratio= -3/22
Capital expendetures ratio= -0.14

Beg Balance propert, Plant, Equipment 154

Cost of equipment sold -40
purchase of building 60
Purchase of Equipment unknown 22
Ending Balance 196

The capital expendetures ratio shows a company's ability tofinance property, plant, and equipment from
operating cash flows. In this case we have a negative and acquisition of equipment was done through
long-term borrowings.

c Free cash flow= cash flow from operating - dividends paid- capital expenditure
Free cash flow= -3-2-22
Free cash flow= -27
 free cash flow shows the amount of cash available for extra capital expenditures, investing in other companies.
In this case the company's operations required the use of cash insteading of earnings from operating activities.

4 Change in cash = + cash from operating activities

+ cash from investing activities
+ cash from financing activities

Change in cash= -3 + 12 + 13
Change in cash= 22

5
a cash collected from customers= sales revenue-increase in accounts revievable
cash collected from customers= 140-10
cash collected from customers= 130

b Cash paid to suppliers of merchandise

Purchases = cost of goods - decrease in inventory

Purchases = $4 - $4
purchases = 0

Payments to suppliers= purchases + decrease in accounts payable

Payments to suppliers= $0 + 14
Payments to supplier = 14

c Cash paid for income taxes= Income tax expense + decrease in income taxes payable

Cash paid for income taxes = 4 + (4-3)

Cash paid for income taxes = 5