Question

Balance Sheet 2017 2018 Assets Current assets Cash $5,000 $6,500 Accounts receivable $31,500 30,000 $42,000 Inventory 40,000 Total $75,000 $80,000 Fixed assets Net plant and equipment $393,750 375,000 $450,000 Total assets $473,750 Liabilities and Owners Equity Current liabilities Accounts payable $50,000 $53,750 Notes payable 25,000 $26,250 Total $75,000 $80,000 Long-term debt Owners' equity $85,000 $89,250 Common stock $60,000 $63,000 Accumulated retained 241,500 230,000 earnings Total $290,000 $304,500 Total liabilities and owners' $450,000 $473,750 equity

Prepare a statement of cash flows based on the following financial statements:

Answer 1

Solution :

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

Note :

1. The Net Income for 2018 is the difference in the Accumulated Retained earnings balance between the years 2017 & 2018.

= ( $ 241,500 - $ 230,000 ) = $ 11,500

2. The Cash outflow in the Purchase of plant and equipment is calculated as follows :

= ( Opening Balance of Plant and Equipment ) - ( Closing Balance of Plant and Equipment + Depreciation )

= $ 375,000 - ( $ 393,750 + $ 30,000 )

= - $ 48,750

21.11.2019 - Microsoft Excel FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW $ 11,500.00 $ 30,000.00 Statement of Cash Flows For the Year Ended December 31, 2018 Cash flows from operating activities : Net Income ($ 241,500 - $ 230,000) (From change in accumulated earnings balance) Adjustments : Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable ($ 30,000 - $ 31,500) Increase in Inventory ($ 40,000 - $ 42,000) Increase in accounts payable ($ 53,750 - $50,000) Increase in notes payable ($ 26,250 - $ 25,000) Net cash flow from operating activities - (A) $ $ $ $ -1,500.00 -2,000.00 3,750.00 1,250.00 $ 43,000.00 Cash flows from investing activities : Cash outflow from the purchase of property & equipment ($ 375,000 - $ 393,750 - $ 30,000) Net cash flow from investing activities - (B) $ -48,750.00 $ -48,750.00 Cash flows from financing activities : Cash associated with increase in Common Stock ( $ 63,000 - $ 60,000) Cash associated with increase in long term debt ( $ 89,250 - $ 85,000 ) Net cash flow from financing activities - (C) $ $ 3,000.00 4,250.00 $ 7,250.00 Change in Cash = (A)+(B)+(C)= ($ 43,000.00 + (- $ 48,750.00 ) + $7,250 ) Cash at the beginning of the Year Cash at the end of the Year = ($ 1,500.00 + $ 5,000.00) $ $ $ 1,500.00 5,000.00 6,500.00