Question

The comparative unclassified statement of financial position for Carla Vista Ltd. follows:

CARLA VISTA LTD. Statement of Financial Position December 31
Assets		2018			2017
Cash		$55,000			$28,000
Accounts receivable		81,000			63,000
Inventory		183,000			203,500
Long-term investments		80,000			120,000
Equipment		285,000			156,000
Accumulated depreciation		(61,000	)		(37,000	)
Total assets		$623,000			$533,500
Liabilities and Shareholders’ Equity
Accounts payable		$32,000			$ 45,000
Bank loan payable		153,000			172,500
Common shares		219,000			176,000
Retained earnings		219,000			140,000
Total liabilities and shareholders’ equity		$623,000			$533,500

Additional information:

1.		Net income was $134,100.
2.		Sales were $998,000.
3.		Cost of goods sold was $758,000.
4.		Operating expenses were $45,000, exclusive of depreciation expense.
5.		Depreciation expense was $24,000.
6.		Interest expense was $15,000.
7.		Income tax expense was $27,000.
8.		Long-term investments were sold at a gain of $5,100.
9.		No equipment was sold during the year.
10.		$19,500 of the bank loan was repaid during the year.
11.		Common shares were issued for $43,000.

Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Solution

Carla Vista
Statement of Cash Flows
For the Year Ended December 31-2018
Cash flows from operating activities:
Cash received from customers		$   980,000
Cash paid to suppliers	$ (750,500)
Cash paid for operating expenses	$        (45,000)
Cash paid for Interest	$    (15,000)
Cash paid for Income tax expense	$    (27,000)
		$ (837,500)
Net cash flow from operating activities		$   142,500
Cash flows from (used for) investing activities:
Sale of Investment	$     45,100
Cash used for purchase of equipment	$ (129,000)
Net cash flow used for investing activities		$    (83,900)
Cash flows from (used for) financing activities:
Issue of shares	$     43,000
Repayment of bank loan	$    (19,500)
Cash used for dividends	$    (55,100)
Net cash flow from financing activities		$    (31,600)
Increase in cash		$     27,000
Cash at the beginning of the year		$     28,000
Cash at the end of the year		$     55,000

Working

Cash received from customers
Sales revenue	$ 998,000
Less: Inrease in accounts receivable	$ (18,000.00)
Cash received from customers	$ 980,000

.

Cash payments for merchandise
Cost of goods sold	$    758,000.00
Less: Decrease in Inventory	$    (20,500.00)
Net purchases	$    737,500.00
Add: Decrese in Accounts payable	$      13,000.00
Cash payments for merchandise	$    750,500.00