Concept explainers
Statement of Cash Flow:
The statement of cash flows is one of the financial statements, which provides information about cash inflows and cash outflows of an enterprise’s operating, investing, and financing activities that occurred during the period.
To prepare: Statement of Cash Flow of S Industries for the period ended December 31, 2016.
Answer to Problem 4.11P
Prepare Statement of Cash Flows of S Industries for the period ended December 31, 2016.
S Industries | ||
Statement of Cash Flows | ||
For the period ending December 31, 2016 | ||
($ in thousands) | ||
Amount in $ | Amount in $ | |
Cash flows from operating activities: | ||
Net income | 3,850 | |
Adjustments for non cash items: | ||
Depreciation | 1,600 | |
Cash flows before changes in | 5,450 | |
Changes in working capital: | ||
Increase in accounts receivable (a) | (300) | |
Increase in inventory (b) | (1,000) | |
Decrease in prepaid rent (c) | 150 | |
Increase in accounts payable (d) | 300 | |
Increase in interest payable (e) | 100 | |
Increase in deferred service revenue (f) | 200 | |
Decrease in income tax payable (g) | (250) | (800) |
Net Cash flows from operating activities (1) | 4,650 | |
Cash flows from investing activities: | ||
Purchase of equipment | (4,000) | |
Sale of equipment | 500 | |
Net Cash flows from investing activities (2) | (3,500) | |
Cash flows from financing activities: | ||
Loan payable | 5,000 | |
Payment of dividends | (1,000) | |
Net Cash flows from financing activities (3) | 4,000 | |
Net increase in cash and cash equivalents
| 5,150 | |
Cash and cash equivalents on January 1, 2016 | 2,200 | |
Cash and cash equivalents on December 31, 2016 | 7,350 |
Table (1)
Explanation of Solution
- Increase in current assets and decrease in current liabilities causes cash outflows.
- Increase in current liabilities and decrease in current assets causes cash inflows.
- Payment of dividend is a financing activity and causes
cash outflow . - Purchase of equipment is an investing activity and causes cash outflow.
- Sale of equipment is an investing activity and causes
cash inflow . - Depreciation is a non cash expense, added back to net income.
Working notes:
- (a) Compute changes in accounts receivables:
- (b) Compute changes in inventory:
- (c) Changes in the prepaid rent:
- (d) Changes in accounts payable:
- (e) Changes in interest payable:
- (f) Changes in deferred service revenue:
- (g) Changes in income taxes payable:
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