Chapter 13: Quavo, Inc., a merchandiser, recently completed the 2018 calendar ye

ID: 2335397 • Letter: C

Question

Chapter 13: Quavo, Inc., a merchandiser, recently completed the 2018 calendar year. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheet and income statement follow: Quavo, Inc. Comparative Balance Sheet December 31, 2018 and 2017 2018 2017 Assets Cash Accounts receivable Inventory Prepaid expenses Equipment Accum. depreciation-Equipment Total assets 125,370 $ 19,700 84,200 1,650 95,000 (16,000) 118,150 31,700 79,400 2,400 60,000 37,500) 254,150 309,920 $ Accounts payable Long-term notes payable Bonds payable Common stock, $5 par value Paid-in capital in excess of par value, common stock 11,700 78,500 29,500 91,000 15,000 8,500 50,000 90,000 11,650 10,650 Retained earnings 87,570 309,920 $ 80,000 254,150 Total liabilities and equity

Explanation / Answer

Answer:

Quavo inc

Statement of cash flow

Amount $

Cash flow from operating activity

Net income

22570

Adjustment to recoile the net income to
Cash flow from operating activity

Depreciation

8500

Gain on sale of equipment

-2000

Decrease in Account receivable (31700-19700).

12000

Increase in Inventory (79400-84200)

-4800

Decrease in prepaid Exp (2400-1650)

750

Decrease in Account Payable (11700-15000)

-3300

11150

Net Cash flow from operating activity

33720

Cash flow from Investing activity

sale of equipment

22,000

Purchase of equipment

-25,000

Net Cash flow from Investing activity

-3,000

Cash flow from Financing activity

Issue of long term notes payable

10,000

Cash paid to bonds payable

-20,500

Issue of common share(200*10)

2,000

Dividend paid (80,000+22570-87570)

-15,000

Net Cash flow from Financing activity

-23,500

Net cash inflow/ outflow

7,220

Add: opening cash balance

118150

Ending Cash Balance

125,370

Note:

Purchase of Equipment by signing $60,000 note payable is non cash transaction