Question

References Review View Help Open in Desktop App Tell me what you want to do Editing 0... 12 А" А B I U A A A E A Styles v O Find v Q1. a) Mike Corporation. Accounts Department have compiled the following data for the year ended December 31st, 2019: 35,000 40,000 Payment of dividends Proceeds from issuance of common shares Sales revenue Increase in operating current asfets other than cash Repurchase of common shares. Cost of goods sold $ 6,000 Other operating expenses. Purchase of equipment. 20.000 Decrease in operating current 224,000 liabilities. Payment of note payable 30,000 Proceeds from sale of land. 5,000 Depreciation expense $100,000 5,000 30.000 60,000 8,000 Prepare the operating activities section of Mike's statement of cash flows for the year ended December 31st 2019. Please uses the indirect method for operating cash flows. Answer: Mike Corporation. Statement of Cash flow For Year Ended December 31, 2019

Answer 1

a.

MIKE CORPORATION

Statement of cash flows

For the year ended Dec 31,2019

Cash flows from operating activities
Sales		224,000
Less: COGS		-100,000
Other Operating expenses		-35000
Net income		89,000
Adjustments to reconcile net income to net cash
from operating activities
Depreciation	8000	8000
Changes in current operating assets and liabilities
Increase in operating current assets other than cash	-30,000
Decrease in operating current liabilities	-5000	-35000
Net cash flows from operating activities		62,000

Dividends paid is to be shown under financing activities. Payment of notes payable is non-operating nature, hence, it’s not included in above.

b.

i. The cash flow statement provides assistance in prediction of future cash flows by reporting cash flows, which are themselves good predictors.

ii. The cash flow statement helps to evaluate management decision by reporting on managers.