Question

QUESTION 5 (Points 30)

5. The accounting staff of Sparks INC has assembled the following information for the year ended December 31, 2019:

$ 825,000 2,500,000 2,200,000 Cash sales .... Credit sales Collections on accounts receivable Cash transferred from the money market fund to the general bank account Interest and dividends received Purchases (all on account) Payments on accounts payable to merchandise suppliers Cash payments for operating expenses Interest paid .... Income taxes paid ... Loans made to borrowers Collections on loans (excluding receipts of interest) Cash paid to acquire plant assets Book value of plant assets sold Loss on sales of plant assets Proceeds from issuing bonds payable Dividends paid ........ Cash and cash equivalents, Jan. 1 250,000 100,000 1,800,000 1,500,000 1,050,000 180,000 95,000 500,000 260,000 3,100,000 660,000 80,000 2,500,000 120,000 512,000

5.1. Prepare a statement of cash flows in the format Example below (Allison corporation) Place brackets around amounts representing cash outflows. Use the direct method of reporting cash flows from operating activities.

5.2. Some of the items above will be listed in your statement without change. However, you will have to combine certain given information to compute the amounts of
5.2.1. collections from customers,
5.2.2. cash paid to suppliers and employees, and

5.2.3. proceeds from sales of plant assets.
(Hint: Not every item listed is used in preparing a statement of cash flows.) Example of a statement of cash flow format:

Answer 1

Cash flow statement: (Amount in $)

Cash flow from Operating Activities Collection from customers (825,000+2200,000) Cash paid to creditors Cash paid to Operating expenses Interest paid Income tax paid Cash flow from Operating Activities 3025000 -1500000 -1050000 -180000 -95000 200,000 Cash flow from Investing Activities Sale Proceeds from Money Market Fund Interest and dividend Loan made to borrowers Collection from borrowers Plant purchased Sale of asset (660000-80000) Cash flow from Investing Activities 250,000 100,000 (500,000) 260,000 (3,100,000) 580,000 (2,410,000) Cash flow from Investing Activities Bonds issued Dividends received Cash flow from Investing Activities 2,500,000 (120,000) 2,380,000 Total Cash during the year Add: Beginning balance of Cash and Cash equivalent Ending Cash and Cash equivalent 170,000 512,000 682,000