Kate has just completed her first year running Kate’s Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate’s Cards.Additional information:1. There were no disposals of equipment during the year. 2. Dividends in the amount of $1,300 were paid in cash during the year. 3. Prepaid expenses relate to operating expenses.Required. Prepare a statement of cash flows for Kate’s Cards for the year ended August 31, 2019, using the indirect method. Hint: Since this was Kate’s first year of operations, the beginning balance sheet account balances were zero. The second picture where it shows pink is what needs to be filled in. Kate's CardsStatement of Cash FlowsFor the Year Ended August 31, 2019Cash flows from operating activitiesCash provided by operating activitiesCash flow from investing activitiesCash used by investing activitiesCash flow from financing activitiesCash provided by financing activitiesIncrease in cashCash balanoe, beginning of the year0.00Cash balance, end of the year Sales revenue. .$185,000106,000Cost of goods soldGross profit..79,000Operating expensesWagesConsulting.18,00011,850Insurance1,200Utilities2,400Rent14,400Depreciation .Total operating expenses.3,25051,100Income from operationsInterest expense..27,900900Income before income tax27,0005,400Income tax expense.Net income$ 21,600KATE'S CARDSBalance SheetAs of August 31, 2019AssetsCurrent assetsCash...$17,40011,000Accounts receivableInventory.Prepaid insurance.16,0001,000Total current assets45,400EquipmentAccumulated depreciation17,500(3,250)Total assets$59,650LiabilitiesCurrent liabilitiesAccounts payable.$ 6,200Unearned revenue1,2501,900Other current liabilitiesTotal current liabilities.9,35015,000Note payableTotal liabilities..24,350Stockholders' equityCommon stock ..500Additional paid-in-capitalPreferred stock..Retained earnings9,5005,00020,300Total stockholders' equity.35,300Total liabilities and stockholders' equity$59,650

Cash flow statement is prepared to analyze the cash flows during the year. It has cash flows from 3 activities, namely, Operating activities, Investing activities and Financing Activities.Statement of Cash Flows: Cash flow from Operating activities Net income $21,600 Depreciation $3,250 Increase in Accounts Receivables ($11,000) Increase in Inventory ($16,000) Increase in Prepaid Insurance ($1,000) Increase in Accounts Payable $6,200 Increase in Unearned Revenue $1,250 Increase in Other Current Liabilities $1,900 Cash flow from Operating Activities $6,200 Cash Flow from Investing Activities Purchase from Equipment ($17,500) Cash Flow from Investing Activities ($17,500) Cash flow from Financing Activities Issue of Common stock (Paid in capital included) $10,000 Preferred stock issued $5,000 Dividends paid ($1,300) Notes Payable issued $15,000 Cash Flow from Financing Activities $28,700 Net Increase in Cash $17,400 Opening Balance of Cash Nil Closing Balance of Cash $17,400 Note: In operating cash flows, only interest paid is added back not interest expense. Increase in current assets decrease the cash balance while increase in current liability increases the cash balance.

Answered: Sales revenue. $185,000 106,000 Cost of…

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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Kate has just completed her first year running Kate’s Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate’s Cards.Additional information:

1. There were no disposals of equipment during the year.
2. Dividends in the amount of $1,300 were paid in cash during the year.
3. Prepaid expenses relate to operating expenses.Required.

Prepare a statement of cash flows for Kate’s Cards for the year ended August 31, 2019, using the indirect method. Hint: Since this was Kate’s first year of operations, the beginning balance sheet account balances were zero. The second picture where it shows pink is what needs to be filled in.

Kate's Cards
Statement of Cash Flows
For the Year Ended August 31, 2019
Cash flows from operating activities
Cash provided by operating activities
Cash flow from investing activities
Cash used by investing activities
Cash flow from financing activities
Cash provided by financing activities
Increase in cash
Cash balanoe, beginning of the year
0.00
Cash balance, end of the year

Sales revenue. .
$185,000
106,000
Cost of goods sold
Gross profit..
79,000
Operating expenses
Wages
Consulting.
18,000
11,850
Insurance
1,200
Utilities
2,400
Rent
14,400
Depreciation .
Total operating expenses.
3,250
51,100
Income from operations
Interest expense..
27,900
900
Income before income tax
27,000
5,400
Income tax expense.
Net income
$ 21,600
KATE'S CARDS
Balance Sheet
As of August 31, 2019
Assets
Current assets
Cash...
$17,400
11,000
Accounts receivable
Inventory.
Prepaid insurance.
16,000
1,000
Total current assets
45,400
Equipment
Accumulated depreciation
17,500
(3,250)
Total assets
$59,650
Liabilities
Current liabilities
Accounts payable.
$ 6,200
Unearned revenue
1,250
1,900
Other current liabilities
Total current liabilities.
9,350
15,000
Note payable
Total liabilities..
24,350
Stockholders' equity
Common stock ..
500
Additional paid-in-capital
Preferred stock..
Retained earnings
9,500
5,000
20,300
Total stockholders' equity.
35,300
Total liabilities and stockholders' equity
$59,650

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