The following transactions occurred during FY 2016 (January 1, to December 31, 2
ID: 2583035 • Letter: T
Question
The following transactions occurred during FY 2016 (January 1, to December 31, 2017):
Net income: $ 3,000,000
Depreciation & Amortization for the year: $250,000
Impairment loss for the year: $125,000
Gain on Machinery disposal: $ 100,000
Loss on a sale of a small equipment: $50,000
Provisions for warranty expenses created: $200,000
Reversal (release) on warranty expenses: $50,000
The working capital accounts are as follow:
Accounts
As of January 1
As of December 31
Marketable securities
25,000
45,000
Account receivables
300,000
450,000
Inventories
120,000
80,000
Account payables
200,000
180,000
Notes Payables
75,000
1000,000
Wages Due
100,000
180,000
Cheetah LLC has issued 120,000 shares @ 15 per value
New loan from TD Bank: $300,000
Dividends paid: $150,000
Acquisitions of a new building: $ 250,000
Repairs work on the new building before use: $25,000
Tasks: (1) Compute the cash flows from operations under the indirect method
(2) Compute the cash flows from financing activities
(3) Compute the cash flows from investing activities
(4) Prepare the Net cash flows.
Accounts
As of January 1
As of December 31
Marketable securities
25,000
45,000
Account receivables
300,000
450,000
Inventories
120,000
80,000
Account payables
200,000
180,000
Notes Payables
75,000
1000,000
Wages Due
100,000
180,000
Explanation / Answer
Amount $ Operating Activities Net Income 30,00,000 Adjustments: Non-Cash adjustment: Depreciation & Amortization 2,50,000 Impairment loss 1,25,000 Gain on Machinery disposal -1,00,000 Loss on a sale of a small equipment 50,000 Provisions for warranty expenses created 2,00,000 Reversal (release) on warranty expenses -50,000 Due to changes in Working capital; Due to changes in Marketable securities (25000-45000) -20,000 Due to changes in accounts receivable (300000-450000) -1,50,000 Due to changes in Inventories (120000-80000) 40,000 Due to changes in accounts payable (180000-200000) -20,000 Due to changes in Notes payable (1000000-75000) 9,25,000 Due to changes in Wages due (180000-100000) 80,000 Net Cash provided (used) by operating activities 43,30,000 Financing Activities Due to change in notes payable Due to change in long-term debt (loan from TD bank) 3,00,000 Due to change in common stock (120000*15) 18,00,000 Payment of common dividends -1,50,000 Interest paid Net cash provided (used) by investing activities) 19,50,000 Investing Activities Cash used to acquire gross fixed assets (250000+25000) -2,75,000 Net cash provided (used) by investing activities -2,75,000 Net Cash provided (used) by operating activities 43,30,000 Net cash provided (used) by investing activities) 19,50,000 Net cash provided (used) by investing activities -2,75,000 Net Cash flows 60,05,000
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