Exercise 1-50 (Algorithmic) Statement of Cash Flows Walters Inc. began operation

Question

Exercise 1-50 (Algorithmic)
Statement of Cash Flows

Walters Inc. began operations on January 1, 2019. The following information relates to Walters' cash flows during 2019.

Required:

1. Calculate the cash provided/used for each cash flow category. If a net amount is negative (a cash outflow), enter your answer as a negative number.

2. Conceptual Connection: Comment on Walters' creditworthiness.

Walters has positive cash flow, especially from operations , showing the company is in a good financial position to pay its debts as they come due. The negative cash flow from investing activities is a sign of a growing company that is investing in revenue-producing assets.

Cash received from owners $201,900 Cash paid for purchase of land and building 126,900 Cash paid for advertising 34,200 Cash received from customers 139,600 Cash paid to purchase machine 32,200 Cash paid to employees for salaries 46,400 Cash paid for dividends to stockholders 37,900 Cash paid for supplies 28,700

Explanation / Answer

1. Net cash provided by operating activities = -34200+139600-32200-46400-28700 = $(1900) Cash outflow)

2. Net cash used by investing activities = 201900-126900 = $75000 (Cash inflow)

3. Net cash provided by financing activities = (37900) ( Cash outflow)

Walters has negative cash flow from operating activities & to repay its debt it has take inflows from the owners tosupport its operating expenses. The position of the company is not sound.

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