In: Accounting
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
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