Exercise 5-14 The comparative balance sheets of Monty Inc. at the beginning and
ID: 2338526 • Letter: E
Question
Exercise 5-14 The comparative balance sheets of Monty Inc. at the beginning and the end of the year 2017 are as follows. MONTY INC. BALANCE SHEETS Dec. 31, 2017 Jan. 1, 2017 Inc./Dec. Assets Cash Accounts receivable Equipment Less: Accumulated Depreciation-Equipment $47,790 95,530 43,530 21,530 $165,320 15,790 $32,000 Inc. 89,740 23,740 11,000 5,790 Inc. 19,790 Inc. 10,530 Inc. Total $118,270 Accounts payable Common stock Retained earnings $24,530 102,790 38,000 $165,320 16,740 81,740 19,790 $118,270 7,790 Inc. 21,050 Inc. 18,210 Inc. Total Net income of $48,530 was reported, and dividends of $30,320 were paid in 2017. New equipment was purchased and none was sold. Prepare a statement of cash flows for the year 2017. (Show amounts that decrease cash flow with either a -sign e.g.-15,000 or in parenthesis e.g. (15,000).)Explanation / Answer
MONTY INC.
Statement Cash Flows
For the year ended December 31, 2017
Cash Flow from Operating Activities:
Net Income
$ 48,530.00
Add: Adjustments
Depreciation Expense
$ 10,530.00
Increase in Accounts Receivables
$ (5,790.00)
Increase in Accounts Payable
$ 7,790.00
$ 12,530.00
A. Net Cash Provided by Operating Activities
$ 61,060.00
Cash Flow from Investing Activities:
Purchase of Equipment
$ (19,790.00)
B. Net Cash Used in Investing Activities
$ (19,790.00)
Cash Flow from Financing Activities:
Proceeds from issue of common stock
$ 21,050.00
Payment of Dividend
$ (30,320.00)
C. Net Cash Provided by Financing Activities
$ (9,270.00)
Net Decrease in cash [A+B+C]
$ 32,000.00
Add: cash at the beginning
$ 15,790.00
Cash at the end
$ 47,790.00
Note:
Depreciation is a non cash Expense that is why it is added back to Operating profit to calculated cash generated from operations.
When Current asset Increase or Current Liability Decrease this means that cash is used.
When Current asset Decrease or Current Liability Increase this means that cash has been saved and hence added to cash from Operations. .
MONTY INC.
Statement Cash Flows
For the year ended December 31, 2017
Cash Flow from Operating Activities:
Net Income
$ 48,530.00
Add: Adjustments
Depreciation Expense
$ 10,530.00
Increase in Accounts Receivables
$ (5,790.00)
Increase in Accounts Payable
$ 7,790.00
$ 12,530.00
A. Net Cash Provided by Operating Activities
$ 61,060.00
Cash Flow from Investing Activities:
Purchase of Equipment
$ (19,790.00)
B. Net Cash Used in Investing Activities
$ (19,790.00)
Cash Flow from Financing Activities:
Proceeds from issue of common stock
$ 21,050.00
Payment of Dividend
$ (30,320.00)
C. Net Cash Provided by Financing Activities
$ (9,270.00)
Net Decrease in cash [A+B+C]
$ 32,000.00
Add: cash at the beginning
$ 15,790.00
Cash at the end
$ 47,790.00
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