139) Your best friend just lost his job because the company he was working for went bankrupt. He was complaining to you that even though the company had been profitable for three years in a row, it still went out of business. He asks you how this can happen.
a) Explain the most likely reason for the company's declaring bankruptcy. Could your best friend have seen it coming? How?
b) Discuss the four purposes of the cash flow statement.
140) Indicate the effect that each of the following transactions has on the cash balance. Use + for increase, – for decrease, and 0 for no change.
________ a) Payment of salaries
________ b) Payment of interest
________ c) Payment of dividends
________ d) Sale of common shares
________ e) Payment of accounts payable
________ f) Sale of merchandise for cash
________ g) Acquisition of patent by issuing common shares
________ h) Conversion of debt to common shares
________ i) Receipt of cash dividends
________ j) Receipt of stock dividends
________ k) Purchase of land