Question

Question 4: A company had a $51 000 net loss for 2019. A dividend of $19 000 was paid during the year and depreciation expense for 2019 was $14 000. The balance sheet records the following working capital accounts as below. Calculate whether this company generated any cash from its operations during 2019.                     

	1 January 2019    ($)	31 December 2019   ($)
Cash	12500	10500
Inventory	15000	9000
Prepayments	5000	2000
Accounts Receivable	11000	15000
Accounts Payable	10000	11000
Accruals	7000	8000

Answer 1

Solution

Net cash used by operating activities

$     (30,000)

The company lost $30000 in operating activities.

Cash flows from operating activities:
Net income	$        (51,000)
Adjustments to reconcile net income to net cash from operating activities
Depreciation expense	$       14,000
Increase accruals	$             1,000
Increase in accounts receivable	$           (4,000)
Increase in accounts payable	$         1,000
Decrease in prepayments	$         3,000
Decrease in inventory	$         6,000
Net cash used by operating activities		$     (30,000)