Question

You have just been hired as the accountant for Lay’s Lush Landscape Sales & Service, Inc. which started operations on January 01, 2016.

Prepare Statement of Cash Flows for the period ending June 30, 2016.

Transactions:

1/1       The owner of the business contributed $10,000 cash and a truck worth $16,000 to the business in exchange for 26,000 shares of $1par common stock. This is the first ever transaction for the business. Use perpetual inventory.

1/31     Borrowed $50,000 on a note payable from the bank.

1/31     Paid January rent, $500

2/01     Purchased equipment for $10,000 cash.

2/15     Purchased 100 bags of lawn fertilizer for $2.00 per bag on account (this lawn fertilizer will be sold to customers to apply themselves)

2/01     Paid February rent, $500

3/01     Prepaid, March – December rent at $500 per month

3/01     Purchased 100 bags of weed preventive fertilizer for $8 per bag on account (this fertilizer will be sold to customers to apply themselves)

3/01     Paid amount owed on lawn fertilizer from 2/15 transaction8 25

3/15     Sold 20 bags of weed preventive fertilizer for $15 per bag (cash)

3/15     Received $500 cash from customers for spring lawn services performed

3/15     Performed spring lawn service to customers on account $750

4/01     Collected $500 from customers on account from 3/15 transaction

4/14     Collected $250 from customers on account from 3/15 transaction

4/15     Sold 25 bags of weed preventive fertilizer for $15 per bag (cash)

4/15     Sold 15 bags of lawn fertilizer for $6 per bag (cash)

4/15     Paid for advertising campaign, $5,000 cash

5/01     Received payment for summer services in advance from 20 customers

            5 months (May – September) at $1000 each for a total of $100,000

5/31     Received payment for May’s lawn services provided from 5 customers, $5,500

5/31     Performed May lawn service for 5 customers on account to be received by 6/15, $5,500

5/31     Paid fuel expense of $1,000 for May

6/05     Paid wages to employees for May, $8000

6/15     Received payment from May’s credit customers, $5,500

6/15     Sold 20 bags of lawn fertilizer for $6 per bag (cash)

6/30     Received payment for June’s lawn service from 4 customers, $4,400

6/30     Performed June lawn service for 5 customers on account to be received by 7/15, $5,500

6/30     Purchased supplies on account, $1,000

6/30     Paid semi-annual payment on note from bank, $4,000 principal plus $2,000 interest expense for a total payment of $6,000

6/30     Paid fuel expense of $1,000 for May

Information for adjusting entries: (06/30/2016)

1. Depreciation on the truck for the period, (St-Line method, 4 years’ useful life, no salvage value)
2. Depreciation on the equipment for the period, (St-Line method, 3 years’ useful life, $1000 salvage value)
3. Adjust for unearned revenue now earned from customers who prepaid on 5/01.
4. Adjust for prepaid rent expired.
5. Accrue wages for employees who worked in June, but will be paid on July 5^th, $7,500

Answer 1

Cash Flow Statement
Direct Method
Cash Flow from Operating Activities
Cash paid for rent		$        (6,000.00)		=-500-500-500*10
Cash paid for lawn fertilizer		$           (200.00)		=-100*2
Cash collected from Customers		$     117,535.00		=20*15+500+500+250+25*15+15*6+100000+5500+5500+20*6+4400
Cash paid for Wages		$        (8,000.00)		-8000
Cash paid for advertisement		$        (5,000.00)		-5000
Cash paid for Fuel		$        (2,000.00)		=-1000-1000
Cash paid for Interest		$        (2,000.00)		-2000
Cash used in Operating Activities			$      94,335.00
Cash flow from Investing Activities
Purchase of Equipment		$     (10,000.00)
Net cash used In investing activities			$   (10,000.00)
Cash flow from Financing Activities
Issue of Common Stock		$        10,000.00
Borrowed on Notes Payable		$        50,000.00
Repayment of Notes Payable		$        (4,000.00)
Net cash used in financing activities			$      56,000.00
Increase in Cash			$   140,335.00
Opening Balance of Cash			$                     -
Closing Balance of Cash			$   140,335.00