Question

Carla Beverage Company reported the following items in the most recent year. Net income $44,400 Dividends paid 6,720 Increase in accounts receivable 10,320 Increase in accounts payable 7,350 Purchase of equipment (capital expenditure) 8,190 Depreciation expense 4,350 Issue of notes payable 24,690 Compute net cash provided by operating activities, the net change in cash during the year. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Answer:

$45,780  Operative Cash Flow  

$55,560  Cash Flow Ind Method  

Explanation:

$55,560  Cash Flow Ind Method  

$44,400  Net Income  

$4,350  Depreciation  

-$6,720  Dividends  

-$10,320  Accounts Receivable  

$7,350  Accounts Payable  

$24,690  Notes Payable  

-$8,190  Property and Equipment  

$45,780  Operative Cash Flow  

$44,400  Net Income  

$4,350  Depreciation  

-$10,320  Accounts Receivable  

$7,350  Accounts Payable  

To prepare the statement of cashflow it's necessary to calculate the difference between the balance on each year.

First we need the value of the Net Income and Depreciation of the year as initial value of the cash flow ($55,560+$4,350),  

then we deduct the amount of dividends paid during the year (-$6,720).  

Then we begin to calculate the Assets section, everytime that the Assets are higher than the past year we have to put money  

from the cash flow to compensate the assets increase and vice versa, with exception of the Cash Accounts that we are calculating.

Per Example: Accounts Receivable -$10,250.

Property decreased Cash flow which means that we buy some assets (-$8,190 )

Then with the Liabilities we do the same but in this case an increase in the liabilities means we have more money to our cash flow,

per example, an increase in the accounts payable means that we paid less to our suppliers so we have the money in the cash accounts.  

Per Example: Accounts Payables $7,350.

The Cash provided by the operative activities try to find the cash inflows and outflows caused by the company's operations,  

so it only includes the income statement and from the balance the deviation in the Accounts Payable, Inventories,  

Depreciation and the account payable segment.  

This statement doesn't include Sales and purchases of assets, dividend distributions and financial movements because this are among the  

non operating activities that affect cashflow.