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Module 2 - Activity 1 - Answer Key

This document summarizes key concepts related to accounting for business combinations, including: 1) Identifying the effects of various transactions on the statement of cash flows as either increasing, decreasing, or having no effect on operating, investing, and financing activities. 2) Classifying events as either adjusting or non-adjusting based on whether they require adjustment to reported financial statement amounts. 3) Distinguishing between accounting policies, estimates, and errors based on the nature of specific accounting items.

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222 views

Module 2 - Activity 1 - Answer Key

This document summarizes key concepts related to accounting for business combinations, including: 1) Identifying the effects of various transactions on the statement of cash flows as either increasing, decreasing, or having no effect on operating, investing, and financing activities. 2) Classifying events as either adjusting or non-adjusting based on whether they require adjustment to reported financial statement amounts. 3) Distinguishing between accounting policies, estimates, and errors based on the nature of specific accounting items.

Uploaded by

Jan Jan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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University of La Salette, Inc.

College of Accountancy
PBSA 003 – Accounting for Business Combination
Module 2 - Activity 1 Answer Key

I. Identify the effects of the following transactions in the Statement of Cash Flows. Write (i) for
increase, (d) for decrease and NE for no effect.

Operating Activity Investing Activity Financing Activity


1. Sale of land at gain d i NE
2. Proceeds of bank loan NE NE i
3. Payment of Interest on i d NE
bank loan
4. Depreciation expense i NE NE
5. Collection of NE NE i
subscription receivable
6. Increase in Inventories d NE NE
7. Increase in Accounts d NE NE
Receivable
8. Decrease in Accounts i NE NE
receivable
9. Retirement expense i NE NE
10. Sale of equipment at i i NE
loss
11. Payment of Dividends NE NE d
12. Interest income d i NE
13. Amortization expense i NE NE
14. Decrease in other d NE NE
payable
15.Bad debt expense i NE NE

II. Identify the following events if it is Non-adjusting or adjusting event. Write A if it is adjusting
and write NA for Non-adjusting.
16. Management’s plan to discontinue or significantly curtail its activities in major geographic
segments. NA
17. Major losses suffered as a result of a natural disaster occurring after the end of reporting period.NA
18. Destruction of assets of the entity by floods occurring after the reporting period. NA
19. Discovery of fraud or errors that show the financial statements are incorrect. A
20. Destruction of a major production plant by fire after reporting date. NA
21. Announcing plan to discontinue an operating segment. NA
22. Changes in foreign exchange at the end of the period. A
23. Dissolution of a major client with existing collectibles after the end of the FS date. A
24. Consolidation of entity. NA
25. Obsolescence of inventories after the end of the reporting period. NA

III. Identify the following items if it is an accounting policy, accounting estimate or error.
26. Cash basis for preparation of financial statements. Policy
27. Journal entry was made for purchase of supplies on account for 3,303 were the actual invoice for
the purchase if 3,033. Error
28. Historical cost as basis for measurement of non-current asset. Policy
29. Straight-line depreciation method. Policy/Estimate
30. Recording retirement plan benefits for the company’s existing employees. Estimate

End

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