### Operating Activities, Financing Activities, Chart of Accounts,Financial Accounting

The key terms in this Financial Accounting course include Accounts Payable, Accounting Equation, Assets, Liabilities, Equity, Cash Inflows, Cash Outflows, Operating Activities, Investing Activities, Financing Activities, Chart of Accounts, Revenue, Expense Account, Ending Inventory, Notes Payable.

Saddleback Company paid off \$50,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Assets, \$50,000 increase; equity, \$50,000 increase.

Assets, \$50,000 decrease; liabilities, \$50,000 decrease.

Assets, \$50,000 decrease; liabilities, \$50,000 increase.

Liabilities, \$50,000 decrease; equity, \$50,000 increase.

Assets, \$50,000 decrease; equity \$50,000 decrease.

##### Explanation

Assets = Liabilities + Equity
Assets would decrease by \$50,000 in Cash due to the payment of the accounts payable.
Liabilities would also decrease by \$50,000 in Accounts Payable due to the payment of an obligation.
There is no effect on Equity.

Rico’s Taqueria had cash inflows from operating activities of \$45,000; cash outflows from investing activities of \$40,000, and cash outflows from financing activities of \$30,000. Calculate the net increase or decrease in cash.

\$115,000 increase.

\$55,000 increase.

\$25,000 decrease.

\$25,000 increase.

\$70,000 decrease.

##### Explanation

Net Increase/(Decrease) in Cash = Cash Flows from Operating Activities + Cash Flows from Investing Activities + Cash Flows from Financing Activities
Net Increase/(Decrease) in Cash = \$45,000 + (\$40,000) + (\$30,000)
The Net Increase/(Decrease) in Cash = (\$25,000)

#### Reading a chart of accounts

A chart of accounts is a list of all ledger accounts and an identification number for each. Identify the following accounts as either an asset (A), liability (L), equity (EQ), revenue (R), or expense (E) account.

Bedrock Company reported a December 31 ending inventory balance of \$416,000. The following additional information is also available:

• The ending inventory balance of \$416,000 included \$72,800 of consigned inventory for which Bedrock was the consignor.
• The ending inventory balance of \$416,000 included \$23,600 of office supplies that were stored in the warehouse and were to be used by the company’s supervisors and managers during the coming year.

Based on this information, the correct balance for ending inventory on December 31 is:

\$247,000

\$392,400

\$309,000

\$363,600

\$343,400

##### Explanation

Start with beginning inventory of \$416,000. The information in the first bullet point was handled correctly since inventory should include consigned goods for which the subject company is the consignor. No adjustment. With respect to the second bullet point, inventory should not include office supplies held for use. Subtract \$23,600. Ending inventory should be \$416,000 − \$23,600 = \$392,400.

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