SERIAL PROBLEM: KATE\'S CARDS (Note: This is a continuation of the Serial Proble
ID: 2535510 • Letter: S
Question
SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 11.) SP12. Kate has just completed her first year running Kate's Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate's Cards. Additional information: 1. There was no disposals of equipment during the year. 2. Dividends in the amount of $1,300 were paid in cash during the year. 3. Prepaid expenses relate to operating expenses Required a. Prepare a statement of cash flows for Kate's Cards for the year ended August 31, 2016, using the indirect method. Hint: Since this was Kate's first year of operations, the beginning balance sheet account balances were zero. Prepare a statement of cash flows for Kate's Cards for the year ended August 31, 2016, using the direct method. (Appendix 12A) b.Explanation / Answer
a. Kate's Cards
Statement of Cash Flows ( Indirect Method)
For the year ended August 31, 2016
b. Kate''s Cards
Statement of Cash Flows ( Direct Method)
For the year ended August 31, 2016
Schedule 1 :
Cash received from customers = Beginning Accounts Receivables + Sales Revenue - Ending Accounts Receivables = 0 + 135,000 - 11,000 = 124,000
Schedule 2 :
Purchase of Inventory = Cost of Goods Sold + Ending Inventory - Beginning Inventory = 72,000 + 16,000 - 0 = 88,000.
Cash paid to suppliers of inventory = Beginning Accounts Payable + Purchase of Inventory - Ending Accounts Payable = 0 + 88,000 - 6,200 = 81,800.
Schedule 3 :
Cash paid for Operating Expenses :
$ $ Cash Flows from Operating Activities Neet Income 16,500 Adjustments to reconcile net income to net cash flows from operations Depreciation 3,250 Interest Expense 900 Increase in Accounts Receivable (11,000) Increase in Inventory (16,000) Increase in Prepaid Insurance (1,000) Increase in Accounts Payable 6,200 Increase in Unearned Revenue 1,250 Increase in other Current Liabilities 1,900 (14,500) Net cash flows from Operating Activities 2,000 Cash Flows from Investing Activities Cash paid for purchase of equipment (17,500) Net cash used in Investing Activities (17,500) Cash Flows from Financing Activities Cash from issuance of Common Stock 10,000 Cash from issuance of Preferred Stock 5,000 Cash from issuance of Note Payable 15,000 Cash paid for interest (900) Cash paid for dividends (1,300) Net cash flows from Financing Activities 27,800 Net increase in Cash and Cash Equivalents 12,300 Beginning Cash and Cash Equivalents 0 Ending Cash and Cash Equivalents 12,300Related Questions
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