A new company began with $60,000 in cash and common stock. It bought 100 TVs for...
A new company began with $60,000 in cash and common stock. It bought 100 TVs for $600 each and resold 90 of them for $700 each. Ignore taxes.
Prepare a balance sheet
Prepare a direct statement of cash flows.
Prepare an indirect statement of cash flows
Homework Answers
Requirement 1
| Balance sheet | |||
| Assets | Liabilities and equity | ||
| Current assets | Liabilities | $ - | |
| Cash | $ 63,000.00 | ||
| Inventory | $ 6,000.00 | Equity | |
| Common stock | $ 60,000.00 | ||
| Retained earnings | $ 9,000.00 | ||
| Total assets | $ 69,000.00 | Total Liabilities and equity | $ 69,000.00 |
Requirement 2
Cash flow - Direct method
| Cash Flow Statement | ||
| Cash Flow from Operating Activities: | ||
| Cash Receipts From Customers | $ 63,000.00 | |
| Less-Cash Disbursment for | ||
| Merchandise inventory | $ (60,000.00) | |
| A. Cash Flow from Operating Activities | $ 3,000.00 | |
| Cash Flow from Investing Activities: | ||
| B. Cash Used in Investing Activities | $ - | |
| Cash Flow from Financing Activities: | ||
| Issue of Common Stock | $ 60,000.00 | |
| C. Cash Flow from Financing Activities | $ 60,000.00 | |
| Increase (Decrease) in cash [A+B+C] | $ 63,000.00 | |
| Add: cash at the beginning | $ - | |
| Cash at the end | $ 63,000.00 | |
Requirement 3
Cash flow - Indirect method.
| Statement of Cash Flows | ||
| A. Cash Flows from Operating Activity | ||
| Net Income | $ 9,000.00 | |
| Adjustment to reconcile net income to | ||
| Net cash from operating activities | ||
| Increase in Inventory | $ (6,000.00) | |
| $ (6,000.00) | ||
| Net cash provided by Operating activities | $ 3,000.00 | |
| B. Cash flows from Investing Activities | ||
| Net cash used by investing activities | $ - | |
| C. Cash Flows from Financing activities | ||
| Issue of common stock | $ 60,000.00 | |
| Net Cash Provided by Financing activities | $ 60,000.00 | |
| Net Increase (Decrease) in Cash [A+B+C] | $ 63,000.00 | |
| Cash at the beginning | $ - | |
| Cash at the end | $ 63,000.00 | |
Working
| Cash+ | Inventory= | Common stock+ | Retained earnings | |
| Started company | $ 60,000.00 | $ 60,000.00 | ||
| Purchase of inventory (600*100) | $ (60,000.00) | $ 60,000.00 | ||
| Sale of goods | $ 63,000.00 | $ 63,000.00 | ||
| Cost of goods sold | $ (54,000.00) | $ (54,000.00) | ||
| Ending balances | $ 63,000.00 | $ 6,000.00 | $ 60,000.00 | $ 9,000.00 |
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