Question

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)

1. 1) Acquired $1,350 cash from the issue of common stock.
2. 2) Borrowed $820 from a bank.
3. 3) Earned $1,000 of revenues cash.
4. 4) Paid expenses of $330.
5. 5) Paid a $130 dividend.

During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)

1. 1) Issued an additional $725 of common stock.
2. 2) Repaid $500 of its debt to the bank.
3. 3) Earned revenues of $1,150 cash.
4. 4) Incurred expenses of $520.
5. 5) Paid dividends of $180.

What is the net cash inflow from operating activities on Packard's statement of cash flows for Year 2?

• $540

• $1,395

• $630

• $1,000

Answer 1

Net cash flows from Operating activities on packard's statememt of cash flows for year 2

Revenues earned $ 1150

Expenses incurred    - $ 520

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Cash flows from operating activities $630

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Cash received from issue of common stock is a financing activity ,which results in cash inflow

Cash paid to bank and dividend paid are also financing activities, which are actually the cash outflows