Part 2 – Statement of Cash Flows Tax Consultants Inc. began operations on January 1, 2019, when it issued 20,000 common shares for $20,000 cash. The company performed tax consulting services throughout its first two years. For 2020, the comparative statements of financial position, income statement, and additional information are presented below (including an analysis of the change in SFP accounts from 2019 to 2020). Comparative Balance Sheets (Statements of Financial Position) Dec. 31, Dec. 31, Change Increase/Decrease Assets 2020 2019 Cash $ 69,000 $10,000 (a) 49,000 increase Accounts receivable 46,000 10,000 (b) 36,000 increase Equipment (net) 40,000 50,000 (c) 10,000 decrease $155,000 $70,000 Liabilities and Shareholders' Equity Accounts payable $ 35,000 $30,000 (d) 5,000 increase Common shares 80,000 20,000 (e) 60,000 increase Retained earnings 40,000 20,000 (f) 20,000 increase $155,000 $70,000 Income Statement For the Year Ended December 31, 2020 Revenues $125,000 Operating expenses other than depreciation 75,000 Depreciation expense 10,000 Income before income taxes 40,000 Income tax expense 6,000 Net income $ 34,000 Note: Tax Consultants Inc. did not purchase of sell any equipment during 2020. Required: 1. Prepare a statement of cash flows using the direct approach for Tax Consultants Inc. for 2020. 2. Determine the cash collected from customers and dividends paid during 2020. 3. After completing the statement of cash flows, discuss the key factors that led to the cash increase or decrease by type of activity (operating, investing, and financing)
Part 2 – Statement of Cash Flows Tax Consultants Inc. began operations on January 1, 2019, when it issued 20,000 common shares for $20,000 cash. The company performed tax consulting services throughout its first two years. For 2020, the comparative statements of financial position, income statement, and additional information are presented below (including an analysis of the change in SFP accounts from 2019 to 2020). Comparative Balance Sheets (Statements of Financial Position) Dec. 31, Dec. 31, Change Increase/Decrease Assets 2020 2019 Cash $ 69,000 $10,000 (a) 49,000 increase Accounts receivable 46,000 10,000 (b) 36,000 increase Equipment (net) 40,000 50,000 (c) 10,000 decrease $155,000 $70,000 Liabilities and Shareholders' Equity Accounts payable $ 35,000 $30,000 (d) 5,000 increase Common shares 80,000 20,000 (e) 60,000 increase Retained earnings 40,000 20,000 (f) 20,000 increase $155,000 $70,000 Income Statement For the Year Ended December 31, 2020 Revenues $125,000 Operating expenses other than depreciation 75,000 Depreciation expense 10,000 Income before income taxes 40,000 Income tax expense 6,000 Net income $ 34,000 Note: Tax Consultants Inc. did not purchase of sell any equipment during 2020. Required: 1. Prepare a statement of cash flows using the direct approach for Tax Consultants Inc. for 2020. 2. Determine the cash collected from customers and dividends paid during 2020. 3. After completing the statement of cash flows, discuss the key factors that led to the cash increase or decrease by type of activity (operating, investing, and financing)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Part 2 – Statement of Cash Flows
Tax Consultants Inc. began operations on January 1, 2019, when it issued 20,000
common shares for $20,000 cash. The company performed tax consulting services
throughout its first two years. For 2020, the comparative statements of financial
position, income statement, and additional information are presented below (including
an analysis of the change in SFP accounts from 2019 to 2020).
Comparative Balance Sheets (Statements of Financial Position)
Dec. 31,
Change
Increase/Decrease
Dec. 31,
Assets
2020
2019
Cash
$ 69,000
$10,000
(a) 49,000 increase
Accounts receivable
46,000
10,000
(b) 36,000 increase
Equipment (net)
40,000
50,000
(c) 10,000 decrease
$155,000
$70,000
Liabilities and Shareholders' Equity
Accounts payable
$ 35,000
$30,000
(d) 5,000 increase
Common shares
80,000
20,000
(e) 60,000 increase
Retained earnings
40,000
20,000
(f) 20,000 increase
$155,000
$70,000
Income Statement
For the Year Ended December 31, 2020
Revenues
$125,000
Operating expenses other than depreciation
75,000
Depreciation expense
10,000
Income before income taxes
40,000
Income tax expense
6,000
Net income
$ 34,000
Note: Tax Consultants Inc. did not purchase of sell any equipment during 2020.
Required:
1. Prepare a statement of cash flows using the direct approach for Tax Consultants Inc.
for 2020.
2. Determine the cash collected from customers and dividends paid during 2020.
3. After completing the statement of cash flows, discuss the key factors that led to the
cash increase or decrease by type of activity (operating, investing, and financing)
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