In: Accounting
You are the CFO for Tom & Jerry’s, Inc. Together with Tom Fheelein and Jerry Rhodeint, the company’s two shareholders, you are examining the following statement of cash flows which they prepared for Tom & Jerry’s, Inc. for the year ended January 31, 2015.
TOM & JERRYS’S, INC. Statement of Cash Flows For the Year Ended January 31, 2015 |
|
Sources of cash | |
From sales of merchandise | $380,000 |
From sale of capital stock | 410,000 |
From sale of investment (purchased below) | 80,000 |
From depreciation | 55,000 |
From issuance of note for truck | 20,000 |
From interest on investments | 6,000 |
Total sources of cash | 951,000 |
Uses of cash | |
For purchase of fixtures and equipment | 320,000 |
For merchandise purchased for resale | 258,000 |
For operating expenses (including depreciation) | 160,000 |
For purchase of investment | 75,000 |
For purchase of truck by issuance of note | 20,000 |
For purchase of treasury stock | 10,000 |
For interest on note payable | 3,000 |
Total uses of cash | 846,000 |
Net increase in cash | $105,000 |
Tom claims that this statement of cash flows is an excellent
portrayal of a superb first year with cash increasing $105,000.
Jerry replies that it was not a superb first year. Rather, he says,
the year was an operating failure as the statement is presented
incorrectly and $105,000 is not the actual increase in cash. The
cash balance at the beginning of the year was $140,000.
Instructions:
Sollution :-
TOM & JERRY ,INC. | ||
Statement of cash Flows | ||
for the year ended January 31,2015 | ||
Particulars | Details | Amount |
Cash Flow from Operating Activities: | ||
sales of merchandise | $380,000.00 | |
merchandise purchased for resale | -$258,000.00 | |
operating expenses (including depreciation) | $160,000.00 | |
Less:-Non Cash Expenses (Depreciation) | -$55,000.00 | |
Cash Operating expenses | -$105,000.00 | |
Total Cash Flow From Operating Activities (A) | $17,000.00 | |
Cash Flow from Investing Activities: | ||
sale of capital stock | $410,000.00 | |
For purchase of fixtures and equipment | -$320,000.00 | |
Sale of investment | $80,000.00 | |
purchase of investment | -$75,000.00 | $5,000.00 |
Purchase of treasury stock | -$10,000.00 | |
Interest on investments | $6,000.00 | |
Total Cash Flow From Investing Activities (B) | $91,000.00 | |
Cash Flow from Financing Activities: | ||
interest on note payable | -$3,000.00 | |
Net Cash Flow From Financing Activities (C) | -$3,000.00 | |
Net Increase in Cash | $105,000.00 | |
Cash at the beginning of the year | $140,000.00 | |
Cash at the end of year | $245,000.00 |
I agree with TOM because statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000