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Mark’s Consulting experienced the following transactions for 2018, its first year of operations, and 2019. Assume...

Mark’s Consulting experienced the following transactions for 2018, its first year of operations, and 2019. Assume that all transactions involve the receipt or payment of cash. Transactions for 2018 Acquired $75,000 by issuing common stock. Received $125,000 cash for providing services to customers. Borrowed $20,000 cash from creditors. Paid expenses amounting to $55,000. Purchased land for $30,000 cash. Transactions for 2019 Beginning account balances for 2019 are: Cash $ 135,000 Land 30,000 Notes payable 20,000 Common stock 75,000 Retained earnings 70,000 Acquired an additional $25,000 from the issue of common stock. Received $135,000 for providing services. Paid $15,000 to creditors to reduce loan. Paid expenses amounting to $70,000. Paid a $12,500 dividend to the stockholders. Determined that the market value of the land is $40,000. b-4. Prepare a statement of cash flows for each year accounting period

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b-4) Statement of cash flows for each accounting period is shown as follows:- (Amounts in $)

Cash Flows from Operating Activities: 2018 2019
Cash received from services to customers 125,000 135,000
Cash paid for expenses (55,000) (70,000)
Net cash provided by operating activities (A) 70,000 65,000
Cash Flows from Investing Activities:
Cash paid for purchase of land (30,000) 0
Net Cash used for investing activities (B) (30,000) 0
Cash Flows from Financing Activities:
Cash received from issue of common stock 75,000 25,000
Cash received by issue of notes payable 20,000 0
Amount paid for notes payable 0 (15,000)
Dividends paid 0 (12,500)
Net Cash provided by/(Used by) Financing Activities (C) 95,000 (2,500)
Net Increase/(Decrease) in cash (D = A+B+C) 135,000 62,500
Add: Beginning Cash Balance (E) 0 135,000
Ending Cash Balance (D+E) 135,000 197,500

Working Notes:-

1) Issue of notes payable is a financing activity as loan is used for financing the business.

ekkarill92 answered 1 year ago
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