Question

Following are comparative balance sheets for Millco Inc. at January 31 and February 28, 2020:

MILLCO INC.
Balance Sheets
February 28 and January 31, 2020
	February 28				January 31
Assets
Cash	$	50,400			$	44,400
Accounts receivable		76,800				63,600
Merchandise inventory		97,200				112,800
Total current assets	$	224,400			$	220,800
Plant and equipment:
Production equipment		199,200				182,400
Less: Accumulated depreciation		(28,800	)			(25,200	)
Total assets	$	394,800			$	378,000
Liabilities
Accounts payable	$	44,400			$	49,200
Short-term debt		52,800				52,800
Other accrued liabilities		25,200				28,800
Total current liabilities	$	122,400			$	130,800
Long-term debt		39,600				55,200
Total liabilities	$	162,000			$	186,000
Stockholders' Equity
Common stock, no par value, 48,000 shares authorized, 36,000 and 33,600 shares issued, respectively	$	124,800			$	115,200
Retained earnings:
Beginning balance	$	76,800			$	51,600
Net income for month		43,200				34,800
Dividends		(12,000	)			(9,600	)
Ending balance	$	108,000			$	76,800
Total stockholders' equity	$	232,800			$	192,000
Total liabilities and stockholders' equity	$	394,800			$	378,000

Required:

1. Calculate the change that occurred in cash during the month. You may assume that the change in each balance sheet amount is due to a single event (for example, the change in the amount of production equipment is not the result of both a purchase and sale of equipment). Because the retained earnings section of the balance sheet is, in and of itself, an analysis of the change in the retained earnings account for the month, the row for net income and dividends should be entered as the February amount and not the change. Use the space to the right of the January 31 data to enter the difference between the February 28 and January 31 amounts of each balance sheet item.
2. Prepare a statement of cash flows that explains above changes?

MILLCO INC. Balance Sheets January 31 and February 28, 2020 February 28 January 31 Change Assets Cash $50,400 $44,400 Accounts receivable 76,800 63,600 Merchandise inventory 97,200 112,800 Total current assets $224,400 $220,800 Plant and equipment: Production equipment 199,200 182,400 Less: Accumulated depreciation (28,800) (25,200) Total assets $394,800 $378,000 Liabilities Accounts payable $44,400 $49,200 Short-term debt 52,800 52,800 Other accrued liabilities 25,200 28,800 Total current liabilities $122,400 $130,800 Long-term debt 39,600 55,200 Total liabilities $162,000 $186,000 Stockholders’ Equity Common stock $124,800 $115,200 Retained earnings: Beginning balance $76,800 $51,600 Net income for month 43,200 34,800 Dividends (12,000) (9,600) Ending balance $108,000 $76,800 Total stockholders’ equity $232,800 $192,000 Total liabilities and stockholders’ equity $378,000

	MILLCO INC. Statement of Cash Flows For the Month Ended February 28, 2020 Cash flows from operating activities: Add (deduct) items not affecting cash: $0 Cash flows from investing activities: Cash flows from financing activities: 0 $0

Answer 1