14E - Intermediate Accounting (Kieso)

Question

The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2017 are as follows.

CONSTANTINE CAVAMALIS INC
BALANCE SHEETS
Assets	Dec 31, 2017	Jan 1, 2017	Inc./Dec.
Cash	\(45,000	\)13,000	\(32,000 Inc.
Accounts receivable	91,000	88,000	3,000 Inc.
Equipment	39,000	22,000	17,000 Inc.
Less: Accumulated depreciation – Equipment	(17,000)	(11,000)	6,000 Inc.
Total	158,000	\)112,000
Liabilities and Stockholder’s equity
Account payable	\(20,000	\)15,000	5,000 Inc.
Common stock	100,000	80,000	20,000 Inc
Retained earnings	38,000	17,000	21,000 Inc.
Total	\(158,000	\)112,000

 

Net income of \(44,000 was reported, and dividends of \)23,000 were paid in 2017. New equipment was purchased and none was sold. 

Instructions 

Prepare a statement of cash flows for the year 2017.

Step-by-Step Solution

Answer

Net increase in cash is equal to $32,000.

Definition of Dividends

Dividends can be defined as the portion earned by the company’s shareholders. It is distributed by the company and decided by the company’s directors.

Statement of cash flow

Particular	Amount $	Amount $
Cash flow from operations:
Net income	$44,000
Add or less: Adjustments to net income
Depreciation expenses	6,000
Increase in accounts receivables	(3,000)
Increase in account payable	5,000
Net cash flow from operations		$52,000
Cash flow from investing:
Purchase of equipment	(17,000)
Net cash used in investing activity		(17,000)
Cash flow from financing:
Issue of common stock	20,000
Cash dividend paid	(23,000)
Net cash used in financing activity		(3,000)
Net increase or decrease in cash		32,000
Add: opening cash balance		13,000
Ending cash balance		$45,000