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Chapter 14: Q11SE (page 772)

Preparing a statement of cash flows using the direct method Jelly Bean, Inc. began 2018 with cash of \(58,000. During the year, Jelly Bean earned revenue of \)595,000 and collected \(614,000 from customers. Expenses for the year totaled \)427,000, of which Jelly Bean paid \(212,000 in cash to suppliers and \)205,000 in cash to employees. Jelly Bean also paid \(148,000 to purchase equipment and a cash dividend of \)57,000 to its stockholders during 2018. Prepare the company鈥檚 statement of cash flows for the year ended December 31, 2018. Format operating activities by the direct method.

Short Answer

Expert verified

Net Increase/(Decrease) in cash is ($8,000).

Step by step solution

01

Step-by-Step SolutionStep 1: Cash flow from operating activities

Cash flows from operating activities

Receipts:

Collection from customers

$614,000

Payments:

To suppliers

($212,000)

To employees

($205,000)

Net cash provided by operating activities

$197,000

02

Statement of cash flows- direct method


Jelly Bean Inc.

Statement of cash flows

Year ended 31st December, 2018

Cash flows from operating activities

$197,000

Cash flows from investing activities

Cash purchase of equipment

($148,000)

Net cash used for investing activities

($148,000)

Cash flows from financing activities

Cash payment of dividends

($57,000)

Net cash provided by financing activities

($57,000)

Net Increase/(Decrease) in cash

($8,000)

Cash balance, December 31, 2017

$58,000

Cash balance, December 31, 2018

$50,000

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Most popular questions from this chapter

Preparing the statement of cash flows鈥攊ndirect method The income statement of Boost Plus, Inc. follows: Gross Profit Net Sales Revenue Cost of Goods Sold Salaries Expense 137,000 94,000 3,000 56,000 \( 54,000 81,000 Depreciation Expense鈥撯�揚lant Assets Net Income Before Income Taxes Income Tax Expense Net Income Total Operating Expenses 27,000 \) 53,000 BOOST PLUS, INC. Income Statement Year Ended September 30, 2018 Operating Expenses: \( 231,000 Additional data follow: a. Acquisition of plant assets is \)124,000. Of this amount, \(108,000 is paid in cash and \)16,000 by signing a note payable. b. Cash receipt from sale of land totals \(20,000. There was no gain or loss. c. Cash receipts from issuance of common stock total \)36,000. d. Payment of notes payable is \(15,000. e. Payment of dividends is \)5,000. f. From the balance sheet: September 30 2018 2017 Cash \( 39,000 \) 13,000 Accounts Receivable 46,000 61,000 Merchandise Inventory 94,000 88,000 Land 82,000 102,000 Plant Assets 214,000 90,000 Accumulated Depreciation (61,000) (34,000) Accounts Payable 32,000 15,000 Accrued Liabilities 12,000 20,000 Notes Payable (long-term) 16,000 15,000 Common Stock, no par 40,000 4,000 Retained Earnings 314,000 266,000 Prepare Boost Plus鈥檚 statement of cash flows for the year ended September 30, 2018, using the indirect method. Include a separate section for non-cash investing and financing activities

The comparative balance sheet of Jackson Educational Supply at December 31, 2018, reported the following:


20182017
Current

Assets:
Cash\( 87,700
\) 23,500
Accounts Receivable15,30022,000
Merchandise Inventory
62,600
60,400
Current

Liabilities:
Accounts Payable
28,100
26,100
Accrued Liabilities
10,600
11,300

Jackson鈥檚 transactions during 2018 included the following:

Payment of cash dividends \( 16,200

Depreciation expense \) 16,700

Purchase of equipment with cash 54,700

Purchase of building with cash 98,000

Issuance of long-term notes payable to borrow cash 48,000

Net income 57,600

Issuance of common stock for cash 105,000

Requirements

  1. Prepare the statement of cash flows of Jackson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities.
  2. Evaluate Jackson鈥檚 cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.
  3. If Jackson plans similar activity for 2019, what is its expected free cash flow?

Question: What accounts on the balance sheet must be evaluated when completing the investing activities section of the statement of cash flows?

Use the Rouse Exercise Equipment data in Exercises E14-23 and E14-24. Rouse plans to purchase a truck for \(23,000 and a forklift for \)125,000 next year. In addition, it plans to pay cash dividends of $3,500. Assuming Rouse plans similar activity for 2019, what would be the amount of free cash flow?

Question: Describe the two formats for reporting operating activities on the statement of cash flows.
See all solutions

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