Question

Use the following information for the next four questions:

	2017	2018
Beginning Cash Balance	20,000	50,000
Net Income	65,000.00	75,000.00
Accounts Receivable	10,000.00	6,000.00
Prepaid Insurance	5,000.00	3,500.00
Inventory	20,000.00	24,000.00
Accounts Payable	3,000.00	2,000.00
Unearned Revenue	5,000.00	7,000.00
Depreciation Expense	25,000.00	20,000.00
Cash Paid for Dividends	25,000.00	5,000.00
Cash Payment to Repay Note Payable	-	10,000.00
Cash Payment to Purchase Land	10,000.00	-
Cash Received for Sale of Equipment	-	15,000.00
Cash Received for Issuance of Stock	-	10,000.00

What is the cash flow from operating activities for 2018 (use negative number for cash outflow and positive number for net cash inflow)

What is the cash flow from investing activities for 2018 (use negative number for cash outflow and positive number for net cash inflow)

What is the cash flow from financing activities for 2018 (use negative number for cash outflow and positive number for net cash inflow)

What is the ending cash balance for 2018?

Answer 1

Solution:

Requirement:1

Cash flows from operating activities:
Net Income	$            75,000
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$            20,000
Changes in current operating assets and liabilities:
Decrease in Account Receivable	$              4,000
Decrease in Prepaid insurance	$              1,500
Increase in Inventory	$            (4,000)
Decrease in accounts payable	$            (1,000)
Increase in unearned revenue	$              2,000
Cash flows from operating activities		$        97,500

Requirement:2

Cash flow from[used for] investing activities:
Cash payment to repay note payable	$         (10,000)
Cash received for sale of equipment	$            15,000
Cash flow from investing activities (B)	$                     -	$          5,000

Requirement:3

Cash flow from financing activities:
Cash from issuance of common stock	$            10,000
Cash used for dividends	$            (5,000)
Cash flow from financing activities (C )		$          5,000

Requirement:4

Ending cash balance for 2018 = $ 157,500

Calculation:

Ending cash balance for 2018 = Opening Balance + Cash flow from operating, investing and financing activities

= 50000 + 97500+5000+5000 = 157500