Question

Prepare the cash flow statement for the company for the year 2018 (start with NPAT) and write down your answer for each section. (Do not show the full format, just write down the balance for each section.) (Depreciation Expense for the year 2018 is 500,000 USD)

1. Cash flow from operations: ?
2. Cash flow from investments:?
3. Cash flow from financing:?
4. Cash Surplus (Deficit) :?

Z&B Company Balance Sheets (USD)								Z&B Company Income Statement for the Year 2018 (USD)
ASSETS	31.12.2017			31.12.2018
Current Assets Cash	520.000			460.000				Net Sales		18.000.000
Accounts Receivable	480.000			490.000				Cost of Goods Sold		15.500.000
Inventories	740.000			870.000				Gross Profit		2.500.000
Fixed Assets Tangible Fixed Assets (Net)	1.760.000			1.800.000				Operating Expenses		1.766.000
TOTAL ASSETS	3.500.000			3.620.000				Operating Profit		734.000
								Non-operating Expenses		0
LIABILITIES + EQUITY								Earnings Before Interest&Taxes		734.000
Short-Term Liabilities								Interest Expense		200.000
Accounts Payable	660.000			520.000				Earnings Before Taxes		534.000
Bank Loan	550.000			1.540.000				Tax Expense (40%)		213.600
Accrued Taxes	90.000			110.000				Net Profit After Taxes		320.400
Long-Term Liabilities
Bank Loan	900.000			50.000
Owners’ Equity Common Stocks	400.000			400.000
Retained Earnings	900.000			1.000.000
Total Liabilities		3.500.000	3.620.000

Answer 1

a) Cash flows from operating activities = $ 1,750,400

b) cash flows from investing activities = $ -540,000

c) Cash flows from financinf activities = $ -1,270,400

d) cash surplus or ( deficit) = (deficit) = ( 60,000) [ 1,750,400 -540,000 - 1,270,400 = -60,000)

Calculation of above answers in below:-

Cash Flow Statement for the year ending 2018
Cash flows from operations	Amount	Net Amount
Net Income	320400
Add-Adjustments to reconcile net income to net cash from oprtating activities
Depreciation	500,000
Tax expense in 2018 income statement	213,600
Interest expense	200000
Operating profit before working capital changes	1,234,000
Add or (less) Working capital changes
Increase in account receivable	-10,000
Increase in inventory	-130,000
Decrease in account payable	-140,000
Increase in bank loan	990,000
Cash generate from operations	1,944,000
Less - Income tax Paid (See Note 1 below)	-193,600
Net cash generated from the operating activities	1,750,400	1,750,400
Cash flows from Investing activities
Purchase of fixed assets (see note 2 in below)	-540000
Net cash used in investing activities	-540000	-540,000
Cash flows from financing activities :-
Repayment of bank loan in long term liabilities	-850,000
Interest Paid	-200,000
Dividends paid(see in note 3 below)	-220400
Net cash used in investing activities	-1,270,400	-1,270,400
Net cash surplus or ( deficit) during year 2018		(60000)
Add- Cash and cash equivalents at the beginning of the year		520,000
Cash and cash equivalents at the end of the year		460,000

Working Notes:-

Working Note -1
income tax expense for the years 2018	213,600
Add- Income tax liability at beginning of the year	90000
Less - Income tax liability at end of the year	110,000
Income tax paid	193,600
Working Note-2
Net assets at end of the year	1800000
Add- Depreciation	500000
Less- Fixed assets at beginning of the year	1760000
Purchase of fixed assets	540000
Working Note-3
Retained earnings at beginning of the year	900000
Add- Net profit	320400
Less- Retained earings at the end of the year	1,000,000
Dividends	220,400