Question

Cash Flow

O’My Corporation had the following transactions during the month:

• Sold office furniture for $13,000. Cost was $17,800 and accumulated depreciation was $14,400.
• Purchased equipment for $20,000
• Paid a $15,000 note payable off.
• The company wrote off $25,000 of fully depreciated long term assets.
• The company agreed to allow the president to borrow $15,000 on a note from the corporation next month if he needed the funds.
• Borrowed $35,000 on a new note payable
• Converted a $100,000 bond payable into common stock. Each bond was worth 200 shares of $5 par with a market price of $15.
• Declared and paid $8,000 in cash dividends
• Loss for the period was $45,000

Accounts of O’My Corporation included the following:

Account	1/1/11 Balance	12/31/11 Balance
A/R	15,000	17,000
Inventory	13,000	9,000
Supplies	6,000	6,500
Books Receivable	4,500	5,000
Paper Products	6,000	3,000
Long Term Assets
A/P	15,000	16,000
N/P (long term)	15,000	35,000
Other Long Term Liabilities
Equity Items

Required: compute a cash flow statement

Answer 1

Cash Flow Statement:

O'My Corporation Cash Flow Statement
Cash from Operating activities
Loss for the period	(45,000)
Less: Increase in A/R	(2,000)
Add: Decrease in Inventory	4,000
Less: Increase in Supply	(500)
Less: Increase in Books receivable	(500)
Add: Decrease in Paper products	3,000
Less: Increase in Accounts payable	1,000
Less: Profit on sale of Furniture - w. Note 1	9,600
	(30,400)	(30,400)
Cash from Investing activities
Sold office Furniture	13,000
Equipment Purchase	(20,000)
	(7,000)	(7,000)
Cash from Financing activities
Note paid	(15,000)
Notes Issued	35,000
Dividend paid	(8,000)
	12,000	12,000
Increase / (decrease) in Cash		(25,400)

W. Note 1
Office Furniture
Sale value	13,000
Less: Cost - Accumulated Depreciation	3,400
(17800 - 14400)
Profit on sale of Furniture	9,600

W. Note 2:

Bonds payable converted into common stock not impact cash flow as no cash movement.

Wrote off $ 25,000 Fully depreciated long terms asset not impact Cash Flow.