Cheryl Alder operates her own catering service. Summary financial data for March

Question

Cheryl Alder operates her own catering service. Summary financial data for March are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the balance sheet. Each increase and decrease in stockholders' equity, except transaction (4), affects net income. Describe each transaction. What is the amount of net decrease in cash during the month? What is the amount of net increase in retained earnings during the month? What is the amount of the net income for the month? How much of the net income for the month was retained in the business? What is the amount of net cash flows from operating activities? What is the amount of net cash flows from investing activities? What is the amount of net cash flows from financing activities?

Explanation / Answer

(a)

1. Received cash for the services provided to the customers amounting $28,000

2. Purchase land for $20,000 from cash

3. Paid Cash for expenses incurred during the month amounting $18,000

4. Dividend Paid to the stockholders by cash of $1,000

(b) Net Decrease in Cash during the month is of $11,000

(c) Net Increase in Retained Earnings during the month is of $9,000

(d) Amount of Net Income for the month is $10,000

(e) Net Income retained in the business was $9,000

(f) Net Cash inflow from operating activities = $10,000

(g) Net Cash outflow from investing activities = $20,000

(h) Net Cash Outflow from financing activities = $1,000

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