Question

Victor Ortega is the owner of a very successful small company that operates a carry‐out pizza parlor. He also prepares his own financial statements. His task today is the completion of this year's SCF. Using the following Condensed Income Statement and Statement of Retained Earnings for last year, as well as last year's and this year's balance sheets information, help Victor complete his balance sheets and SCF at this year end. Then, answer the questions that follow:

Ortega's Pizza
Condensed Income Statement and Statement of Retained Earnings
For the Period: January 1 through December 31, This Year

CONDENSED INCOME STATEMENT
SALES	$700,000
Cost of Sales	210,000
GROSS PROFIT	490,000
Operating Expenses (excluding depreciation)	388,000
Depreciation	14,000
OPERATING INCOME	88,000
Interest	30,000
INCOME BEFORE INCOME TAXES	58,000
Income Taxes (40%)	23,000
NET INCOME	35,000
STATEMENT OF RETAINED EARNINGS
Retained Earnings, December 31, Last Year	50,000
Net Income for This Year	35,000
Subtotal	85,000
Cash Dividends Paid This Year	20,000
Retained Earnings, December 31, This Year	$65,000

Ortega's Pizza
Balance Sheets
December 31, Last Year and This Year

	Last Year ($)	This Year ($)	↑	↓	Sources	Uses
ASSETS
Current Assets
Cash	42,000	30,000
Marketable Securities	85,000	91,000
Net Receivables	93,000	80,000
Inventories	58,000	67,000
Total Current Assets	278,000	268,000
Property and Equipment	965,000	939,000
Less Accumulated Depreciation	40,000	54,000
Net Property and Equipment	925,000	885,000
TOTAL ASSETS	1,203,000	1,153,000
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Accounts Payable	40,000	45,000
Notes Payable	125,000	150,000
Accrued Wages	38,000	23,000
Total Current Liabilities	203,000	218,000
Long‐Term Liabilities
Long‐Term Debt	500,000	300,000
Total Liabilities	703,000	518,000
Owners' Equity
Common Stock	75,000	95,000
Paid in Capital	375,000	475,000
Retained Earnings	50,000	65,000
Total Owners' Equity	500,000	635,000
TOTAL LIABILITIES AND OWNERS' EQUITY	1,203,000	1,153,000
TOTAL SOURCES AND USES OF FUNDS

Ortega's Pizza
Statement of Cash Flows
December 31, This Year

NET CASH FLOW FROM OPERATING ACTIVITIES
Net Income
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation
Decrease in Net Receivables
Increase in Inventories
Increase in Accounts Payable
Decrease in Accrued Wages
Net Cash Flow from Operating Activities
NET CASH FLOW FROM INVESTING ACTIVITIES
Increase in Marketable Securities
Decrease in Property and Equipment
Net Cash Flow from Investing Activities
NET CASH FLOW FROM FINANCING ACTIVITIES
Increase in Notes Payable
Decrease in Long‐Term Debt
Increase in Capital Stock (Common Stock + Paid Capital)
Dividends Paid
Net Cash Flow from Financing Activities
Net Increase (Decrease) in Cash This Year
Cash at the Beginning of This Year
Cash at the End of This Year
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for
Interest
Income Taxes

1. Did the change in “Inventories” reflect a source or a use of funds? What was the amount of that change?
2. Did the change in “Long‐Term Debt” reflect a source or a use of funds? What was the amount of that change?
3. What is Victor's proper entry for “Net Cash Flow from Operating Activities”?
4. What is Victor's proper entry for “Net Cash Flow from Investing Activities”?
5. What is Victor's proper entry for “Net Cash Flow from Financing Activities”?
6. What is the amount of cash Victor has at the end of this year?

Answer 1

f) Cash Victor has at the end of this year=$30000

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