Using an Internet web browser, search for AICPA’s Statement on Standards for Attestation Engagements (SSAE) No. 18, and perform the following: a. Explain the relevance of SSAE 18 and what….
What is meant by the terms positive cash flows and negative cash flows ? How do they relate to revenues and expenses?
- Questions Discussion（Total 5 questions，10 point/each，Totaling 50 points）
- What is meant by the terms positive cash flows and negative cash flows ? How do they relate to revenues and expenses? (10 points)
(2) Give an example of business transactions that would: (10 points)
- Cause one asset to increase and another asset to decrease, with no effect on either liabilities or owners’ equity.
- Cause both total assets and liabilities to increase with no effect on owners’ equity.
（3）What are the characteristics of a strong income statement? What are the characteristics of a strong statement of cash flows? (10 points)
(4) What is the purpose of making adjusting entries? Your answer should relate adjusting entries to the goals of accrual accounting. Do adjusting entries affect income statement accounts, balance sheet accounts, or both? Explain. (10 points)
(5) What type of accounts are referred to as permanent or real accounts? What is meant by these terms? Can a company be profitable but not liquid? Explain. (10 points)
- Accounting cycle practice（Total 5 items，10 point/each, Totaling 50 points）
In March 2011, Mary Tone organized a corporation to provide package delivery services. The company, called Tone Deliveries, Inc., began operations immediately. Transactions during the month of March were as follows:
Mar. 2 The corporation issued 40,000 shares of capital stock to Mary Tone in exchange for $80,000 cash.
Mar. 4 Purchased a truck for $45,000. Made a $15,000 cash down payment and issued a note payable for the remaining balance.
Mar. 5 Paid Sloan Properties $2,500 to rent office space for the month.
Mar. 9 Billed customers $11,300 for services for the first half of March.
Mar. 15 Paid $7,100 in salaries earned by employees during the first half of March.
Mar. 19 Paid Bill’s Auto $900 for maintenance and repair services on the company truck.
Mar. 20 Collected $3,800 of the amounts billed to customers on March 9.
Mar. 28 Billed customers $14,400 for services performed during the second half of the month.
Mar. 30 Paid $7,500 in salaries earned by employees during the second half of the month.
Mar. 30 Received an $830 bill from SY Petroleum for fuel purchased in March. The entire amount is due by April 15.
Mar. 30 Declared a $1,200 dividend payable on April 30.
The account titles used by Tone Deliveries are:
- Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of March. Organize your answer in tabular form, using the column headings shown below. Use I for increase, D for decrease, and NE for no effect. (10 points, with each transaction 1 points and last March 30 items 0.5 points )
Income Statement Balance Sheet
Transactions Revenue – expense = Net income Assets = Liabilities + Owners’ equity
- Prepare journal entries (including explanations) for each transaction.(10 Points)
- Post each transaction to the appropriate ledger accounts (use a running balance format). (10 Points)
- Prepare a trial balance dated March 31, 2011. (10 Points)
- Using figures from the trial balance prepared in part d, compute total assets, total liabilities, and owners’ equity. Are these the figures that the company will report in its March 31 balance sheet? Explain your answer briefly. (10 Points)