Chapter 14, Problem 2PS

Summary Introduction

Requirement-a:

To calculate:

The Net cash provided by or used in investing activities

Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities

(Note: Cash flows from operating activities can be prepared using direct or indirect method)

Answer to Problem 2PS

The Net cash provided by investing activities is $39,000

Explanation of Solution

The Net cash provided by or used in investing activities is explained as follows:

Cash Flow From Investing Activities:
Purchase of Bus	$ (33,000)
Sale of old equipment	$ 72,000
Cash Provided by Investing Activities		$ 39,000

Summary Introduction

Requirement-b:

To calculate:

The Net cash provided by or used in financing activities

Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities

(Note: Cash flows from operating activities can be prepared using direct or indirect method)

Answer to Problem 2PS

The Net cash used in financing activities is $160,000

Explanation of Solution

The Net cash provided by or used in financing activities is explained as follows:

Cash Flow From Financing Activities:
Cash Dividend	$ (80,000)
Interest Paid on Debt	$ (25,000)
Repurchase of stock	$ (55,000)
Cash used in Financing Activities		$(160,000)

Summary Introduction

Requirement-c:

To calculate:

The Net increase or decrease in cash for the year

Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities

(Note: Cash flows from operating activities can be prepared using direct or indirect method)

Answer to Problem 2PS

The Net increase in cash for the year is $84,000

Explanation of Solution

The Net increase or decrease in cash for the year is explained as follows:

Cash Flow From Operating Activities:
Cash Payment to Suppliers	$ (95,000)
Cash collected from Customers	$ 300,000
Cash Provided by Operating Activities		$ 205,000
Cash Flow From Investing Activities:
Purchase of Bus	$ (33,000)
Sale of old equipment	$ 72,000
Cash Provided by Investing Activities		$ 39,000
Cash Flow From Financing Activities:
Cash Dividend	$ (80,000)
Interest Paid on Debt	$ (25,000)
Repurchase of stock	$ (55,000)
Cash used in Financing Activities		$(160,000)
Net Increase in Cash for the year		$ 84,000