Chapter 1, Problem 9PSB

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows the how company generates money or revenue for its working.   

To determine: To create asset liability and equity table.

Answer to Problem 9PSB

Balance of account receivable is 5000, Office Supplies 3700, Roofing equipment 5000, Office Equipment 2300, Account payable 7100, and revenue is 20,800.

Explanation of Solution

Dated(July)	Assets					Liabilities	Owner’s capital
Date(July)	Cash	Account Receivable	Office Supplies	Roofing equipment	Office Equipment	Account payable	Capital	Revenue	Expenses	Net income
1	80000						80000			0
2	-700								700	-700
3	-10000			5000		4000				0
6	-600		600							0
8	7600							7600		7600
10					2300	2300				0
15		8200						8200		8200
17			3100			3100				0
23	-2300					-2300				0
25		5000						5000		5000
28	8200	-8200								0
30	-1560									-1500
31	-295									-295
31	-1800						-1800			0
		5000	3700	5000	2300	7100		20800		18245

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows the how company generates money or revenue for its working.   

To prepare: Income statement and statement of retain earning.

Answer to Problem 9PSB

Net income account for $18,245, retain earning account for $13,335 and assets and liabilities account for $100,435.

Explanation of Solution

Income statement for the month of May

R companyIncome statement for the month ended May 31
Particular	Amount $	Amount $
Service revenue	20,800
Gain on sale of equipment	295
Total revenue		21,095
Less: Expense
Rent expense	700
Salaries Expense	1,560
Total Expense		5,960
Net income		18,245

Statement of retain earning

Particular	Amount $
Retain Earning July 1
Net income	15135
Dividend paid	1800
Retain earning on July 31st	13335

Balance sheet

R companyBalance sheetFor the month ended may 31
Assets		Liability
Particular	Amount	Particular	Amount
Cash	88,135	Account payable	3,100
Accounts Receivable	5,000	Notes payable	4,000
Roofing equipment	5,000	Common Stock	80,000
Office equipment	2,300	Retained earning	13,335
Total Assets	100,435	Total Liabilities	100,435

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.   

To construct: The cash flow statement.

Answer to Problem 9PSB

Balance of cash as on June 31^st 87,545

Explanation of Solution

Company’s cash flow statement

Particular	Particular	Dr.
Cash flow from operation g activities	15800
Receipt of cash from customer	700
Payment made for supplier	600
Payment made for utilities	295
Payment made to employee in cash	1560
Net utilization of cash by activities		12645
Cash flow from investing activities
Purchase of ofiice eq.	100
POurchase roofing Eq.	2300
Net utilization of cash activities		3300
Cash flow from financing activities
Investment	80,000
Dividend	1,800
Net cash by financing		78,200
Net increase in cash		87,545
Balance of cash on july1		0
Balance of cash on july 31		87,545

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.   

To create: Assets, liabilities and equity statement

Answer to Problem 9PSB

Balance of balance sheet 100,935.

Explanation of Solution

Company’s cash flow statement

Balance sheet

R companyBalance sheetFor the month ended may 31
Assets		Liability
Particular	Amount	Particular	Amount
Cash	88,135	Account payable	3,100
Accounts Receivable	5,000	Notes payable	4,000
Roofing equipment	5,000	Common Stock	80,000
Office equipment	2,300	Retained earning	13,335
Roofing equipment of 1st July	5000	Common Stock purchased on 31st July	5000
Total Assets	100,935	Total Liabilities	100,935