Question 4: A company had a $51 000 net loss for 2019. A dividend of $19...

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

Solutions

Expert Solution

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)

ekkarill92 answered 1 year ago

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