In: Accounting
Santana Rey, owner of Business Solutions, decides to prepare a
statement of cash flows for her business using the following
financial data.
BUSINESS SOLUTIONS | ||||||
Income Statement | ||||||
For Three Months Ended March 31, 2020 | ||||||
Computer services revenue | $ | 24,307 | ||||
Net sales | 18,393 | |||||
Total revenue | 42,700 | |||||
Cost of goods sold | $ | 14,652 | ||||
Depreciation expense—Office equipment | 400 | |||||
Depreciation expense—Computer equipment | 1,210 | |||||
Wages expense | 3,050 | |||||
Insurance expense | 525 | |||||
Rent expense | 2,375 | |||||
Computer supplies expense | 1,275 | |||||
Advertising expense | 510 | |||||
Mileage expense | 280 | |||||
Repairs expense—Computer | 860 | |||||
Total expenses | 25,137 | |||||
Net income | $ | 17,563 | ||||
BUSINESS SOLUTIONS | |||||||||||
Comparative Balance Sheets | |||||||||||
December 31, 2019, and March 31, 2020 | |||||||||||
Mar. 31, 2020 | Dec. 31, 2019 | ||||||||||
Assets | |||||||||||
Cash | $ | 80,067 | $ | 53,512 | |||||||
Accounts receivable | 23,667 | 5,168 | |||||||||
Inventory | 674 | 0 | |||||||||
Computer supplies | 2,055 | 510 | |||||||||
Prepaid insurance | 1,020 | 1,585 | |||||||||
Prepaid rent | 815 | 815 | |||||||||
Total current assets | 108,298 | 61,590 | |||||||||
Office equipment | 7,100 | 7,100 | |||||||||
Accumulated depreciation—Office equipment | (800 | ) | (400 | ) | |||||||
Computer equipment | 19,100 | 19,100 | |||||||||
Accumulated depreciation—Computer equipment | (2,420 | ) | (1,210 | ) | |||||||
Total assets | $ | 131,278 | $ | 86,180 | |||||||
Liabilities and Equity | |||||||||||
Accounts payable | $ | 0 | $ | 1,110 | |||||||
Wages payable | 955 | 510 | |||||||||
Unearned computer service revenue | 0 | 1,600 | |||||||||
Total current liabilities | 955 | 3,220 | |||||||||
Equity | |||||||||||
Common stock | 109,000 | 75,000 | |||||||||
Retained earnings | 21,323 | 7,960 | |||||||||
Total liabilities and equity | $ | 131,278 | $ | 86,180 | |||||||
Required:
Prepare a statement of cash flows for Business Solutions using the
indirect method for the three months ended March 31, 2020.
Owner Santana Rey contributed $34,000 to the business in exchange
for additional stock in the first quarter of 2020 and has received
$4,200 in cash dividends. (Amounts to be deducted should be
indicated with a minus sign.)
ANSWER
Business Solutions | ||
Statement of Cash Flows | ||
For the Year Quarter ended March 31, 2020 | ||
Particulars | Details | Amount |
Cash Flow from Operating Activities: | ||
Net Income | $17,563.00 | |
Adjustments to reconcile net income to cash flow from operating activities: | ||
Depreciation expense- Office equipment | $400.00 | |
Depreciation expense- Computer equipment | $1,210.00 | |
Increase in Accounts Receivables ($5,168- $23667) | -$18,499.00 | |
Increase in Inventory ($0- $674) | -$674.00 | |
Increase in Computer Supplies ($510-$2055) | -$1545.00 | |
Decrease in Prepaid Insurance ($1585-$1020) | $565.00 | |
Decrease In Accounts Payable ($0 - $1,110) | -$1,110.00 | |
Increase In Wages Payable ($955- $510) | $445.00 | |
Decrease in Unearned service revenue ($0- $1600) | -$1,600.00 | |
Total Adjustments | -$20,808.00 | |
Net Cash Flow From Operating Activities (A) | -$3,245.00 | |
Cash Flow from Investing Activities: | ||
Purchase of Equipment | $0.00 | |
Net Cash Flow From Investing Activities (B) | $0.00 | |
Cash Flow from Financing Activities: | ||
Issue proceeds of common Stock | $34,000.00 | |
Dividend paid | -$4,200.00 | |
Net Cash Flow From Financing Activities (C) | $29,800.00 | |
Total Cash flow from all activities (A+B+C) | $26,555.00 | |
Cash at the beginning of the year | $53,512.00 | |
Cash at the end of year | $80,067.00 |
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