Instructions: Answer the following. i. Highlight all the mistakes if any in the above cash flows statement. Did investing activities cause the company's cash to increase or decrease? Why is it so? Why net cash balance from investing activities is mostly negative? ii. iii.

Instructions: Answer the following. i. Highlight all the mistakes if any in the above cash flows statement. Did investing activities cause the company's cash to increase or decrease? Why is it so? Why net cash balance from investing activities is mostly negative? ii. iii.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

OVERNIGHT AUTO SERVICE
Statment of Cash Flows.
For the Month Ended November 30-11-2020
Cash flows from operating activities:
Cash received from revenue transactions
$ 2,000
(1,400)
Cash paid for expenses
Net cash provided by operating activities
Cash flows from investing activities:
$800
$(52,000)
(6,000)
(6,800)
600
Purchase of Land
Purchase of building
Payment for the purchase of tools
Collection for sale of tools
Net cash provided by operating activities
Cash flows from financing activities:
Investment by owner
(64,200)
80,000
$16,600
400
$16,999
Increase in cash for the month
Cash balance, Nov 1, 2020
Cash balance, Nov 30, 2020
Page 1 of 2
Instructions: Answer the following.
i. Highlight all the mistakes if any in the above cash flows statement.
ii. Did investing activities cause the company's cash to increase or decrease? Why is it so?
Why net cash balance from investing activities is mostly negative?
Which GAAP principle is clearly reflecting from above statement?
Explain that GAAP principle figured out in (vii)?
Why owner invested 80,000 dollars? Why there is no dollar sign with this amount?
ii.
iv.
v.
vi.
vii.
What do we have to do with final balance?
vii.
What is the reason of mentioning investing activities in the middle?
ix.
What is the reason of mentioning the financing activities in the end? Why not to mention at the top!
Is there any major concern? Or All is well after rectifying mistakes?
х.

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