Question

Following are the transaction of TAR Inc., which provides consulting services related to mining of precious metals.

	Transaction	Amount of Transaction
A	Cash used for payment of employee salaries	$256,000
B	Cash provided from sale of equipment that had been used in operations	100,000
C	Cash used for purchase of office supplies	1,500
D	Cash used for purchase of office equipment	175,000
E	Cash used to pay office utilities	21,000
F	Cash used for payment of office rent	18,000
G	Cash provided from consulting customers	425,000
H	Cash provided from long-term borrowing	125,000
I	Cash used to pay the bank for a loan due this month	75,000
J	Purchase of company vehicle paying 3/10 cash and borrowing the rest.	45,000

16. $___________Refer to transaction J, how much should be included in cash used from investing activities?         

17. $___________Determine the net cash flows from operating activities (include “–“ if needed)                

18. $___________Determine the net cash flows from investing activities (include “–“ if needed)

19. $___________Determine the net cash flows from financing activities (include “–“ if needed)

20. $___________How much did cash change over the year?

Answer 1

16)

Only the 3/10 of cash paid for purchase of company vehicle should be included in cash used from investing activities because the remaining balance of 7/10 will come under cash used from Financing Activities because remaining balance is from borrowings. Therefore, cash used from investing activities for purchase of company vehicle is $13,500 ($45,000*3/10).

17)

	Cash flows from Operating Activities:
A	Cash used for payment of employees salaries	($256,000)
C	Cash used for purchase of office supplies	($1,500)
E	Cash used to pay office utilities	($21,000)
F	Cash used for payment of office rent	($18,000)
G	Cash provided from consulting customers	$425,000
	Net Cash flows from Operating Activities	$128,500

Therefore, net cash flows from Operating Activities is $128,500.

18)

	Cash flows from Investing Activities:
B	Cash provided from sale of equipment that had been used in operations	$100,000
D	Cash used for purchase of office equipment	($175,000)
J	Purchase of company vehicle ($45,000*3/100	($13,500)
	Net Cash flows from Investing Activities	($88,500)

Therefore, net cash flows from Investing Activities is -$88,500.

19)

	Cash flows from Financing Activities:
H	Cash provided from long-term borrowing	$125,000
I	Cash used to pay the bank for a loan due this month	($75,000)
J	Purchase of company vehicle ($45,000*7/100	($31,500)
	Net Cash flows from Financing Activities	$18,500

Therefore, net cash flows from Financing Activities is $18,500.

20)

Net Cash flows from Operating Activities	$128,500
Net Cash flows from Investing Activities	($88,500)
Net Cash flows from Financing Activities	$18,500
Net cash change (Increase / Decrease)	$58,500

Therefore, net cash change over for the year is $58,500.