Question

In: Accounting

CP 14–8   Assume the following income statement and balance sheet information: Service revenue (all cash)                   $175...

CP 14–8   Assume the following income statement and balance sheet information:

Service revenue (all cash)                   $175

Operating expenses Salaries (all cash)$ 85

Net income                                            $90

                                    

                                     2020 2019

Current assets

Cash                        $1,250 $1,600

Short‐term invest.         100      200

                               $1,350 $1,800

Liabilities

Borrowings                    600     1,000

Stockholders’ equity

Common stock              200       300

Retained earnings         550      500

                                      750       800

                                 $1,350   $1,800

Other information: The short‐term investments are riskless and will be converted to a known amount of cash in 60 days. Borrowings are non‐ current. No gain or loss occurred when common stock was repurchased.

Required:

1. Calculate cash flow from operating activities

.2.Prepare the 2020 statement of changes inequity

.3.Calculate cash flow from financing activities.

4 .(Appendix) Prepare a cash flow table. Show that cash effects net to a $450 outflow

Solutions

Expert Solution

1) Cash flow from operating Activities :- (indirect method) Particulars Net Income Amount $ 90 Add: Non-operating expenses nil less :- Non-operatng Incomes /Gains nil 90 Add :- Decrease in current Assets/Increase in current Liabilities Less: - Increase in current Assets / Decrease in Current Liabiities nil nil Net cash flow from operating Activities 90

2) Statement of Change in Equity shareholder's Particulars Amount $ Issue of Any shares nil Less:- Redempton of common stock (300-200) -100 Add: Profit on Retained Earnings (550-500) 50 Net changed in Euity -50

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4) Cash flow Table on net effect used of cash $ 450 Particulars Amount $ Net cash used from financing Acrtivities -450 Net cash flow from Investing Activities sales from short-term investment (200-100) 100 Net Cash Add:- opening cash balance (2019) 350 1600 Closing cash (2020) 1250


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