Answer:
<u>Statement of cash flow for the year ended December 31, 2014</u>
Cash flow from Operating Activities
Cash Receipts from Customers $1,139,800
Cash Paid to Suppliers and Employees ($811,600)
Cash Generated from operations $328,200
Income tax paid ($120,000)
Net Cash from Operating Activities $208,200
Cash flow from Investing Activities
Purchase of Equipment ($101,000)
Proceeds from Sale of Land $37,800
Net Cash from Investing Activities $63,200
Cash flow from Financing Activities
Issue of Note Payables $33,400
Repayment of Note Payables ($37,800)
Issue of Common Stock $67,200
Dividends Paid ($91,400)
Net Cash from Financing Activities ($28,600)
<em>Movement during the year $33,000</em>
<em>Beginning Cash and Cash Equivalents $42,000</em>
<em>Ending Cash and Cash Equivalents $75,000</em>
Explanation:
The Direct Method has been used to to prepare Cash flow Statement. See also calculation of the respective line items done below.
<u>Cash Receipts from Customers calculation :</u>
Total Trade Receivables T - Account
Debit :
Beginning Balance $84,000
Sales Revenue $1,200,000
Totals $1,284,000
Credit :
Cash Receipts from Customers $1,139,800
Ending Balance $144,200
Totals $1,284,000
<u>Cash Paid to Suppliers and Employees calculation :</u>
Cost of goods sold $480,000
Add Selling and administrative expenses $360,000
Adjustment for Non -Cash Items :
Depreciation ($31,600)
Adjustment for Working Capital Items :
Increase in Inventory $38,800
Increase in Accounts Payables ($35,600)
Cash Paid to Suppliers and Employees $811,600
Note payable T - Account
Debit :
Ending (29,400 + 302,400) $331,800
Cash (Balancing figure) $37,800
Totals $369,600
Credit :
Beginning (67,200 + 168,000) $235,200
Equipment $101,000
Cash $33,400
Totals $369,600
Equipment T - Account
Debit :
Beginning Balance $504,000
Note Payable $101,000
Cash $184,000
Totals $789,000
Credit :
Ending Balance $789,600
Disposal $0
Totals $789,000
Calculation of Dividends
Beginning Retained Earnings Balance $67,200
Add Income for the year $240,000
Less Ending Retained Earnings Balance $215,800
Dividends Paid $91,400
