Determining net income

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For each of the following items, indicate by letter in the blank spaces below. the section or sections where the effect would be reported. Use the code (A through F) from above. If the item is not required to be reported on the statement of cash flows, write the word in the blank.

Question 1: Assume that generally accepted accounting principles have been followed in determining net income and that there are no short-term securities which are considered cash equivalents.

Point 1: After the retirement of an officer, the insurance policy was canceled, and a cash settlement was received by the firm. These proceeds were in excess of the book value of the policy.

Point 2: Sales discounts lapsed and not taken by customers. (Sales recorded at net originally.)

Point 3: Accrued estimated income taxes for the period. These taxes will be paid next year.

Point 4: Amortization of premium on bonds payable.

Point 5: Premium amortized on investment in bonds.

Point 6: The book value of trading securities was reduced to fair value.

Point 7: Purchase of available-for-sale securities.

Point 8: Declaration of stock dividends (not yet issued).

Reference no: EM132478520

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