Use the following information and prepare an Income Statement (to calculate the net profit) and a Statement of Cash Flows (identify each payment separately) for the month. Identify 2 causes for the difference between net profit and cash flow from operating activities. Describe what the Cash Flow Statement reveals. Bank balance beginning of month 15,600Inventory purchased for cash28,000Bank balance, end of month19,800Miscellaneous expenses paid8,000Cash drawings30,000Payment on accounts payable44,000Cash sales72,000Proceeds from bank loan93,000Collections from accounts receivable40,000Proceeds from sale of motor vehicle12,000Cost of sales69,000Purchase of motor vehicle for cash68,000Credit sales58,000Rent expense800Depreciation3,500Rent paid in advance for the next 6 months4,800 Wages paid30,000 a) Prepare an Income Statement to calculate the net profit.Income StatementPage 1 of 51102AFE ACCOUNTING FOR DECISION MAKINGTrimester 3, 2020b) Prepare a Statement of Cash Flows for the month.Statement of Cash FlowsCash Flows from operating activitiesNet cash used in operating activitiesCash from Investing ActivitiesNet cash used in investing activitiesCash from financing activitiesNet cash provided from financing activitiesNet increase/(decrease) in cash for the monthCash at beginning of the monthCash at the end of the month c) Identify 2 causes for the difference between net profit and cash flow from operating activities.(d) What do the 3 sections of the Cash Flow Statement reveal about the firm?For each of the 3 activities:state whether the flow is positive or negative;describe in words what the net cash flow for each of the 3 activities indicate andstate whether that is a "good" sign or a "not good" sign for the business.Operating activities:Investing activities:Financing activities:

Cash flow statement: It is a statement which reports the cash inflows and outflows of a business…

Answered: Use the following information and…

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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Use the following information and prepare an Income Statement (to calculate the net profit) and a Statement of Cash Flows (identify each payment separately) for the month. Identify 2 causes for the difference between net profit and cash flow from operating activities. Describe what the Cash Flow Statement reveals.

Bank balance beginning of month	15,600	Inventory purchased for cash	28,000
Bank balance, end of month	19,800	Miscellaneous expenses paid	8,000
Cash drawings	30,000	Payment on accounts payable	44,000
Cash sales	72,000	Proceeds from bank loan	93,000
Collections from accounts receivable	40,000	Proceeds from sale of motor vehicle	12,000
Cost of sales	69,000	Purchase of motor vehicle for cash	68,000
Credit sales	58,000	Rent expense	800
Depreciation	3,500	Rent paid in advance for the next 6 months	4,800
		Wages paid	30,000

a) Prepare an Income Statement to calculate the net profit.
Income Statement
Page 1 of 5
1102AFE ACCOUNTING FOR DECISION MAKING
Trimester 3, 2020
b) Prepare a Statement of Cash Flows for the month.
Statement of Cash Flows
Cash Flows from operating activities
Net cash used in operating activities
Cash from Investing Activities
Net cash used in investing activities
Cash from financing activities
Net cash provided from financing activities
Net increase/(decrease) in cash for the month
Cash at beginning of the month
Cash at the end of the month

c) Identify 2 causes for the difference between net profit and cash flow from operating activities.
(d) What do the 3 sections of the Cash Flow Statement reveal about the firm?
For each of the 3 activities:
state whether the flow is positive or negative;
describe in words what the net cash flow for each of the 3 activities indicate and
state whether that is a "good" sign or a "not good" sign for the business.
Operating activities:
Investing activities:
Financing activities:

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