Question

In: Accounting

1) Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged...

1)

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions:

  1. 1) issued stock for $70,000
  2. 2) borrowed $40,000 from its bank
  3. 3) provided consulting services for $69,000 cash
  4. 4) paid back $30,000 of the bank loan
  5. 5) paid rent expense for $16,500
  6. 6) purchased equipment for $27,000 cash
  7. 7) paid $4,500 dividends to stockholders
  8. 8) paid employees' salaries of $36,000


What is Yowell's net cash flow from operating activities?

a) Inflow of $52,500

b) Inflow of $33,000

c) Inflow of $16,500

d) Inflow of $12,000

2)

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)

  1. Acquired $1,400 cash from the issue of common stock.
  2. Borrowed $870 from a bank.
  3. Earned $1,050 of revenues cash.
  4. Paid expenses of $340.
  5. Paid a $140 dividend.

During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)

  1. Issued an additional $775 of common stock.
  2. Repaid $535 of its debt to the bank.
  3. Earned revenues of $1,200 cash.
  4. Incurred expenses of $540.
  5. Paid dividends of $190.

What is the amount of Packard Company's net cash flow from financing activities for Year 2?

a) Net outflow of $535.

b) Net inflow of $585.

c) Net inflow of $50.

d) Net outflow of $725.

Solutions

Expert Solution

Answer 1:

Option c: Inflow of $16,500

Calculation:

Cash flow from operating activities = + 69,000 (-) 16,500 (-) 36,000

= $ 16,500

Note:

Operating activities are those activities that are related to day to day operations of the business.

In other words, operating activities are the functions of the business that are directly related to the production of goods or rendering of services. These are the core and main business activities.

Example: receipt of customers, payments to suppliers, taxes paid, salaries paid, etc..

Answer 2:

Option c: Net inflow of $50

Explanation:

Cash flow from financing activities= $ 775 (-) 535 (-) 190

= $ $ 50

Note:

Financing activities are those activities that are related to procurement or acquisition of funds.

These are those activities that are related to debt and equity.

Example: shares, debentures issued, interest payments, loans from a bank, dividend payments, etc.

In case of any doubt, please comment.

ekkarill92 answered 2 years ago
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