Question

In: Accounting

1) Dresser Arts, which owns an art gallery, reported net income of $270,000. In addition, the...

1) Dresser Arts, which owns an art gallery, reported net income of $270,000. In addition, the following information was taken from its general ledger:  beginning balances in Accounts Receivable and Accounts Payable were $58,000 and$52,000, respectively; ending balances in these accounts were $60,000 and $48,000, respectively. Dresser’s net cashflows from operating activities would be:

2) Burton’s Best Pastries operates a breakfast fast food bar.  For the first quarter of 2019 Burton’s reported net income of $200,000.  Additional information from Burton’s general ledger revealed depreciation expense of $16,000, accounts receivable decreased by $15,000, Land increased by $30,000, and accounts payable decreased by $5,000. Based on this information, what is the cash flow from Operating activities?

3) During the year, Jumping Jacks, paid cash to purchase land. reported in the statement of cash flows?  How would Jumping Jacks report this on the statement of cash flows?

4) Hoola Hoops is preparing a Cash Flow Statement for the fiscal year ended September 30, 2020.  Which of the following transactions affects Hoola Hoops’ Cash Flows?

5) Bravo Company prepared a Cash Flow Statement that included the following information. Cash from operating activities was $39,000, cash used for investing activities was ($59,000) and the net change in cash was $70,000, Based on this information what was cash from/used for financing activities?

Solutions

Expert Solution

1)

Information given in the question -:

Net Income -: $270,000

Accounts receivable Opening Balances -: $58,000 and Closing balances -: $60,000. This means increase in balance during the year and increase in current assets denotes cash outflow under operating activities.

Accounts payable Opening Balances -: $52,000 and Closing balances -: $48,000. This means decrease in current liabilities. Decrease in current liabilities is termed as cash outflow.

Cash Flow Statement

Net Income as per profit or loss account $270,000

Add-: Changes in working capital during the year

Decrease in accounts payable -: ($4,000)

Increase in accounts receivable -: ($2,000)

Net Cash Flow generated from operating activities -: $264,000

Hence the correct answer will be option (a) i.e... $264,000.

2)

Cash flow from operating activities

Net income as per pnl $200,000

Add/Less-: Non-cash expenditures and income

Depreciation $16,000

Fair valuation gain on land ($30,000)

Net Income before changes in working capital -: $186,000

Add/Less-: Changes in workings capital

Add-: Decrease in accounts receivable -: $15,000

Less- Decrease in accounts payable -($5,000)

Net cash flow from operating activities $196,000

3)

Investment in land will be reported under Investing Activities in the Cash flow statement. Its an investment in PPE and should come under investing activities.

4)

Transactions missing

5)

Net Changes in cash is summation of cash flow from operating activities + cash flow investing activities + cash flow from financing activities.

Net Cash i.e.. $70,000 = $39,000 + ($59,000) + CF from financing

Therefore cash flow financing activities should be $90,000


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