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Chapter 14: Q5TI (page 761)

Question: Muench, Inc.鈥檚 accountant has partially completed the spreadsheet for the statement of cash flows. Fill in the remaining missing information.

Short Answer

Expert verified

Answer

Net increase in cash is $1,250.

Step by step solution

01

Calculation of missing information

Particulars

Balance (31/12/2018) (a)

Balance (31/12/2017) (b)

  1. 鈥�(产)

Net Income

$6,300

$4,000

$2,300

Increase in accounts receivables

$5,000

$3,200

$1,800

Decrease in accounts payable

$3,500

$5,000

$1,500

02

Statement showing cash flow from operating activities


MUENCH Inc.

Statement of cash flows

Year ended 31st December, 2018

Cash flows from operating activities

Net Income

$2,300

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation expense-Plant assets

$100

Increase in account receivables

($1,800)

Decrease in account payables

$1,500

($200)

Net cash provided by operating activities

$2,100

Cash flows from investing activities

Cash payment for acquisition of plant assets

($1,000)

Net cash used for investing activities

($1,000)

Cash flows from financing activities

Cash receipt from issuance of common stock

$5,850

Cash payment of dividends

($5,700)

Net cash provided by financing activities

$150

Net Increase/(Decrease) in cash

$1,250

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Most popular questions from this chapter

Preparing the statement of cash flows鈥攊ndirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Sweet Valley, Inc. follow:

Additionally, Sweet Valley purchased land of \(20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset were $13,240. Plant asset was acquired for cash.

Requirements

1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.

2. How will what you learned in this problem help you evaluate an investment?

Question: Describing the purposes of the statement of cash flows Financial statements all have a goal.

The statement of cash flows does as well. Describe how the statement of cash flows helps investors and creditors perform each of the following functions:

a. Predict future cash flows.

b. Evaluate management decisions.

c. Predict the ability to make debt payments to lenders and pay dividends to stockholders.

Question: Classifying items on the statement of cash flows Cash flow items

must be categorized into one of four categories. Identify each item as operating (O), investing (I), financing (F), or non-cash (N).

a. Cash purchase of merchandise inventory

b. Cash payment of dividends

c. Cash receipt from the collection of long-term notes receivable

d. Cash payment for income taxes

e. Purchase of equipment in exchange for notes payable

f. Cash receipt from the sale of land

g. Cash received from borrowing money

h. Cash receipt for interest income

i. Cash receipt from the issuance of common stock

j. Cash payment of salaries

Question: If current liabilities increase, what is the effect on cash? What about a decrease in current liabilities?

Question: Classifying items on the indirect statement of cash flows

Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:

a. Increase in accounts payable

b. Payment of dividends

c. Decrease in accrued liabilities

d. Issuance of common stock

e. Gain on sale of building

f. Loss on sale of land

g. Depreciation expense

h. Increase in merchandise inventory

i. Decrease in accounts receivable

j. Purchase of equipment

Identify each item as a(n): 鈥� Operating activity鈥攁ddition to net income (O+) or subtraction from net income (O-) 鈥� Investing activity鈥攃ash inflow (I+) or cash outflow (I-) 鈥� Financing activity鈥攃ash inflow (F+) or cash outflow (F-) 鈥� Activity that is not used to prepare the indirect statement of cash flows (N)
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