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The following transactions occurred for Mouawad Inc. 1. Inventory costing $295,000 was purchased on account. 2. A new vehicle...

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Accounting

The following transactions occurred for Mouawad Inc.

1.Inventory costing $295,000 was purchased on account.
2.A new vehicle costing $31,000 was purchased. Mouawad paid$6,900 as a down payment, and the remaining $24,100 was financedthrough a bank loan.
3.Surplus land was sold for $76,000, which was $16,500 more thanits original cost.
4.During the year, the company made a payment of $18,000 on itsmortgage payable; $2,250 of this amount was for the interest on thedebt.
5.Wages of $45,000 were charged to expense as they were incurred.No wages were owing to the employees at the end of the year.
6.The company declared and paid dividends of $34,500.

Identify the accounts affected and give the amounts by whichthey would be increased or decreased. (Credit accounttitles are automatically indented when amount is entered. Do notindent manually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.)

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.

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State the amount of any cash flow and whether cash is increasedor decreased.

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Identify how each item would be reported in Mouawad’s statementof cash flows.

Answer & Explanation Solved by verified expert
4.2 Ratings (675 Votes)

ANSWER:-

1)

Account Titles Debit ($) Credit ($)
Inventory A/C 295,000
Accounts payable 295,000
(Being goods purchased on account )
Vehicle A/C 31,000
Cash A/C 6,900
Bank Loan A/C 24,100
(Being new vehicle purchased)
Cash A/C 76,000
Land A/C 59,500
Gain on sale of land A/C 16,500
(Being land sold)
Mortgage payable A/C 15,750
Interest expense A/C 2,250
Cash A/C 18,000
(Being cash paid for mortagage with interest)
Wages expense A/C 45,000
Cash A/C 45,000
(Being wages expense paid )
Cash Dividends A/C 34,500
Cash A/C 34,500
(Being dividend declared and paid )

Note 1) If the company maintains perpetual inventory system then in the first journal entry instead of purchase, Inventory account would have been debited.

2)

Increase/decrease Amount
1 No effect Nil
2 Decrease ($6,900)
3 Increase $76,000
4 Decrease ($18000)
5 Decrease ($45,000)
6 Decrease ($34,500)

3)

Transaction Activity
1 None
2 Investing
3 Investing
4 Financing
5 Operating
6 Financing

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