Question

Information for XYZ Co.

Account Description	December 31, 2017	December 31, 2016
Assets
Cash and Cash Equivalents	45,000	13,000
Accounts Receivable	91,000	88,000
Equipment	139,000	22,000
Accum. Deprec. – Equipment	(17,000)	(11,000)
Total	258,000	112,000
Liabilities & Stockholders’ Equity
Accounts Payable	20,000	15,000
Bonds Payable	100,000	0
Common Stock	100,000	80,000
Retained Earnings	38,000	17,000
Total	258,000	112,000

Additional Information

(A) – Net income for 2017 was $44,000.

(B) – New equipment was purchased in 2017 but not was sold

(C) – Cash dividends of $23,000 were declared and paid in 2017

(D) – $100,000 of equipment was purchased by the issuance of Bonds Payable

Step 1 – Prepare a “Comparative Balance Sheet” and compute the change (increase or decrease) in the account balances during the period. This is your “anchor” and the Cash Flow Statement will reflect all of these changes either in:

• the “cash” section (a combination of (a) Operating Activities, (b) Investing Activities, and (c) Financing Activities) or,
• a “non-cash” section (for Non-Cash Investing and Financing Activities)

  

Account Description	12/31/2017	12/31/2016	Increase Decrease
Assets
Cash and Cash Equivalents	45,000	13,000
Accounts Receivable	91,000	88,000
Equipment	139,000	22,000
Accum. Deprec. – Equipment	(17,000)	(11,000)
Total	258,000	112,000
Liabilities & Stockholders’ Equity
Accounts Payable	20,000	15,000
Bonds Payable	100,000	0
Common Stock	100,000	80,000
Retained Earnings	38,000	17,000
Total	258,000	112,000

Step 2– The “ultimate goal” of the Cash Flow Statement is to determine and detail why Cash and Cash Equivalents during the period ___________________.

Step 3 – Prepare the “Operating Activities” section of the Cash Flow Statement.  

Net Cash Provided by (Used In) Operating Activities

Step 4 – Prepare the “Investing Activities” section of the Cash Flow Statement.  Investing Activities represent either amounts that a company invests in:

(a) itself (i.e., capital expenditures or purchases for fixed assets, purchasing another business) or the disposals/sales of fixed assets or a business, and

(b) the stock or bonds of other entities (i.e., purchasing an investment in the common stock or bonds of another company) or disposing of such investments

Net Cash Provided by (Used in) Investing Activities

Answer 1

XYZ Co.

Cash flow statement

for the year ended 31 December 2017

Cash flow from operating activities
Net Income		21,000
Add: depreciation	6000
Net income before changes in working capital		6000
Increase in accounts receivable	-3000
Increase in accounts payable	5,000	2000
Net cash flow from operating activities(A)		29,000
Cash flow from investing activities
Purchase of equipment	-117000
Net cash flow from Investing activities(B)		-117000
Cash flow from financing activities
Proceeds from issue of bonds	100000
Proceeds from issue of common stock	20000
Net cash flow from financing activities (C )		120000
Cash and cash equivalents at the beginning of the year		13000
Net increase in cash and cash equivalents		32000
Cash and cash equivalents at the end of the year		45000

Explanations:

• Increase in retained earnings is the "Net income"
• Increase in accounts receivables no fund inflow to the extent of $3,000
• Increase in accounts payable no fund outflow to the extent of $5,000
• bonds payable was increased, it means company issued a bonds. it's a financial activity; If it is in asset side then "investing activity"
• Issue of common stock is always finance activity