Explanation Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company. Direct method: This method uses the basis of cash for preparing the cash flows statement. In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year. Prepare the statement of cash flows of Company F for the year ended December 31, 2017 under direct method. Company F Statement of cash flows – Direct method For the year ended December 31, 2017 Particulars Amount Amount Cash flows from operating activities Cash received from customers (1) $567,315 Cash paid for inventory (2) ($370,390) Cash paid for other expenses (3) ($131,775) Cash paid for income taxes ($24,250) Net cash provided by operating activities $40,900 Cash flows from investing activities Cash received from sale of equipment $11,625 Cash paid for equipment ($30,000) Net cash provided by investing activities ($18,375) Cash flows from financing activities Cash proceeds from borrowing of short-term note $4,000 Cash paid to long-term notes payable ($50,125) Cash proceeds from the issuance of stock $50,000 Cash paid for dividends ($50,100) Net cash used in financing activities ($46,225) Net increase in cash and cash equivalents ($23,700) Cash and cash equivalents balance as of December 31, 2016 $73,500 Cash and cash equivalents balance as of December 31, 2017 $49,800 Table (1) Disclosure Notes: Non-cash investing and financing activities: An equipment costing $96,375 have been purchased during the year, out of which $30,000 paid in cash and the balance by signing long term notes payable of $66,375 ( $ 96 , 375 − $ 30 , 000 ) . Working Note: Determine the changes in current assets and Liabilities. Schedule in the changes of assets and liabilities Particulars Amount Current year (December 31, 2017) Previous year (December 31, 2016) Increase/ (Decrease) Accounts receivable $65,810 $50,625 $15,185 Inventory $275,656 $251,800 $23,856 Prepaid expenses $1,250 $1,875 ($625) Accounts payable $53,141 $114,675 ($61,534) Table (2) Determine the cash received from customers

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ISBN: 9781260482829

Author: John J Wild

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Chapter 12, Problem 5AP

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Connect Access Card For Financial Accounting Fundamentals

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