Question

Sunny Technologies Inc. began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016 and 2017, is shown below along with some other information. Sunny Technologies Inc. Income Statement For Year Ended December 31, 2017 Revenues: Sales Cost of goods sold Gross Profit Expenses and other Other expenses Depreciation expense Total operating expenses $627,400 483,400 144,000 $155,400 25,800 181,200 (37,200) 21,000 Operating Profit (Loss) Loss on sales of plant assets Profit (Loss) $(58,200) Sunny Technologies Inc. Post-Closing Trial Balance December 31 2016 76,820 30,600 35,400 190,420 53,000 62,400 6,600 40,020 8,000 163,220 2017 $62,800 42,000 27,400 230,600 64,200 50,160 Account Cash Receivables Merchandise inventory Property, plant and equipment Accumulated depreciation Accounts payable Accrued liabilities Notes payable Common shares Retained eamings 11,400 97,620 49,620 89,800 Other information regarding Sunny and its activities during 2017: 1. Assume all accounts have normal balances. 2. Cash dividends were declared and paid during the year. 3. Plant assets were sold during the year. 4. Plant assets worth $99,400 were purchased during the year by paying cash of $32,200 and issuing a long-term note payable for the balance.

Answer 1

A Cash flow statement provides the following information:
1) Information about company's cash receipt and cash payment during an accounting period.
2) Information about company's operating, investing and financing activities.
3) Information access the company's liquidity, solvency and financing flexibility.
Under the indirect method, net income is converted operating cash flow by making adjustments for the transaction that effect net income but are non cash transactions. The adjustment includes eliminating non cash expenses, non operating items and the changes in the balance sheet account on account of accrual accounting events.

Cash flow from operating activities (CFO), consists of the inflows and outflows of cash resulting from revenue and expense transactions that affect a firm's net income.

Cash flow from investing activities (CFI) consists of the inflow and outflows of cash resulting from the acquisition of long term assets and investment.

Cash Flow from financing activities (CFF) consists of the inflow and outflows of cash resulting from transactions affecting a firm's capital structure.

Amount ($58,200) Sunny Technologies Inc Statement of Cash Flows For year ended December 31, 2017 Particulars Amount Cash Flow from Operating Activity Net Income/(Loss) Adjustment reconcile net income net cash flow from operating activities Add: Depreciation and Amortisation Expense $25,800 Add: Loss on Sale of Equipment $21,000 Increase in Accounts Receivable ($11,400) Decrease in inventory $8,000 Decrease in accounts payable ($12,240) Increase in Accrued Liabilities $4,800 Changes in Working Capital Net Cash (used) in Operating Activity Cash Flow from (used for) Investing Activity Purchase of Plant ($32,200) Sale of Plant $23,620 Net Cash (used) in Investing Activity Cash Flow from (used for) Financing Activity Repayment of Notes Payable ($9,600) Proceeds from Issue of common stock $41,620 Dividend paid ($15,220) Net Cash Flow from Financing Activity Net Decrease in Cash and Cash Equivalents Add : Opening Cash Closing Cash $35,960 ($22,240) ($8,580) $ 16,800 ($14,020) $76,820 $62,800

Working Increase /(Decrease) (A) - (B) $ 11,400 ($8,000) ($12,240) $4,800 Particulars Closing Balance Opening Balance Assets (A) (B) Receivables $42,000 $30,600 Merchandise Inventory $27,400 $35,400 Accounts Payable $50,160 $62,400 Accrued Liabilities $11,400 $6,600 Increase in Current Assets is Cash Outflow and Decrease in Current Assets in Cash Inflow Increase in Current Liability is Cash Inflow and Decrease in Current Liability in Cash Outflow 2 Accumulated Depreciation as on Dec 2016 $53,000 Add: Depreciation for the year $25,800 $78,800 Less: Accumulated Depreciation as on Dec 2017 ($64,200) Accumulated Depreciation on Plant Sold $ 14,600 Gross Block as on Dec 2016 Add: Plant Purchased $1,90,420 $99,400 $2,89,820 ($2,30,600) $59,220 Less: Gross Block as on Dec 2017 Gross Block of Equipment sold Gross Block of Equipment sold Less: Accumulated Depreciation Book Value of Equipment sold Less: Loss on Slae of Plant Sales procees from sale of equipment $59,220 ($14,600) $44,620 ($21,000) $23,620

$40,020 $67,200 ($97,620) $9,600 3 Notes Payable as on Dec 16 Add: On purchase of Plant ($99400 - $32200] Less: Notes Payable as on Dec 17 Notes paid 4 Issue of Common Sck Common Stock as on Dec 2016 Less: Common Stock as on Dec 2017 Issue of share 5 Retained Earnings Opening Balance Add: Net Loss $49,620 ($8,000) $41,620 $1,63,220 ($58,200) $1,05,020 ($89,800) $15,220 Less: Closing Balance Dividend paid