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1.Which of the following transactions will give rise to an assessable capital gain? A Gerry purchased a car for $13,000 on 3 August 2015 and sold it for $18,000 on 25 November 2019 Michael purchased a ticket in a lottery for a new home worth $500,000. He won the home and received it on 12 September 2019. He is currently using it as his home George injured his arm in a work accident and was given $10,000 in compensation for the personal injury Phillip purchased 1,000 shares in SOLAR for $9.00 each on 12 March 2015. He sold them for $11 each on 23 May 2019.
2. Stacey Crowe is starting a new photography service business, FotoPhinish. Using the table below, record the dollar impact of transactions a. through i. on Stacey's Asset, Liabilities, and Equity accounts. a. Stacey invested $14,000 cash into her business. b. Foto Phinish paid $2,500 to cover rent for the current month. c. FotoPhinish purchased supplies on credit; $800. d. Foto Phinish completed work for a client on account; $3,400. e. FotoPhinish purchased new equipment by paying cash of $1,950. f. FotoPhinish hired a technician who will begin work next month, at monthly salary of $5,000. g. FotoPhinish paid for the supplies in c. h. FotoPhinish performed work for a client and received cash of $3,400. i. FotoPhinish paid the administrative assistant's salary of $2,700. Transactio Accounts Cash + Receivable Assets + Parts Supplies Liabilities Equity - Accounts + Stacey Crowe, Payable Capital n + Equipment b.
Q1: Categorize the following accounts into the table below. Note that certain accounts may appear in multiple columns. Building Insurance Expense Investment by Owner Accounts Receivable Accounts Payable Equipment Fuel Expense Interest Income Interest Payable Maintenance Expense Merchandise Inventory Owner's Equity, End, Balance Prepaid Expenses Rent Revenue Salaries Expense Unearned Revenue Utilities Expense Withdrawals Advertising Expense Furniture Interest Receivable Notes Payable Prepaid Rent Salaries Payable Vehicle Other Expenses Profit Loss Service Revenue Vehicle Expenses Cash Interest Expense Land Owner's Equity, Beg. Balance Rent Expense Telephone Expense Wages Expense Balance Sheet Liabilities Income Statement Expenses Statement of Changes in Owner's Equity Assets Owner's Equity Revenues.
3.Watch the fight plain the "The corpulent dividi aller? Aast Equity Net Cash Flow Cortid Income Tarings . NA NA NA NA NA Out NA NA NA MA NA HA NA NA NA Out F NA NA NA NA NA A A Repen Equity Comment Net Income NA NA NA NA NA Outlow FA AL Fury Common Retained Cashow NA NA NA NA NA Outlow Expenses Cachu Como NA NA DO Ases uity Revenue Expres Connen and w NA NA DO.
1.A & D will give rise to capital gains as asset is purchased and then sold in these transactions
while in B that is lottery income and this will be taxable with special tax rate
in C he has received compensation which will be taxable under head "profit and gains from business and profession"
2.Assets include both current assets and non current assets. Liabilities include current liabilities and non current liabilities. Owner's equity include the aspects relating to owner's fund. Statement of changes in owner's equity is part of owner's equity.
a) Investing cash into the business will increase cash and owners equity.
b) Payment of rent will reduce cash and reduce owner's equity.
c) Purchase of supplies on credit will increase supplies and accounts payable.
d) Work completed on account is a service revenue which will increase accounts receivable and owner's equity.
e) Purchase of new equipment by paying will increase equipment and reduce cash.
f) Hiring a technician who will begin work next month will not make any transactions. Transaction will be effected only when the salary is paid to the technician. Hence, nothing will be recorded.
g) Paid for supplies will reduce cash and accounts payable.
h) Performed work for client and received cash will increase cash and owner's equity.
i) Payment of administrative assistant salary will reduce cash and owner's equity.
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3.Answer: (A)
Analysis: when the company paid cash dividend to shareholders. The entry is -
Retained Earnings a/c .........Dr xxxx
To cash a/c xxxx
(OR)
1) Dividends a/c...............Dr
To cash a/c
2) Retained earnings a/c...........Dr
To Dividends a/c
Hence, cash a/c (Asset) decreases and Dividend amount is decreased from retained earnings too.
Cash dividend is a cash outflow for the company and it is a financing activity, come under Financing Activities in cash flow statement.
