Question

Direct: Preparing statement of cash flows and supporting note LO P1, P3, P5

Answer 1

Answer:

Statement of cash flows (direct method) for the year ended December 31, 2017

Cash flow from Operating Activities

Cash received from customers                                               495,000

Cash paid to Suppliers and Employees(20,000 + 76,500)   -96,500

Net Cash from Operating Activities                                        398,500

Cash flow from Investing Activities

Interest Received                                                                         3,500

Proceeds from Sale of Equipment                                            60,250

Purchase of Store Equipment                                                  -24,750

Net Cash from Investing Activities                                          -39,000

Cash flow from Financing Activities

Repurchase of Notes Payable                                               -100,000

Dividends Paid                                                                          -10,000

Net Cash from Financing Activities                                        -110,000

Movement During the Year                                                     108,000

Cash and Cash Equivalents at Beginning of the Year            40,000

Cash and Cash Equivalents at End of the Year                      148,000

Explanation:

Cash flow Statements include only those items that involve movement of Cash. Therefore, ignore non-cash items.

Note also that, the direct method is required for this question. Therefore, stick to the required method and ignore an cash related to Working Capital items (as this is dealt with in indirect method)