Q38E - Horngren'S Financial And Managerial Accounting

Question

Morning Bean Food Equipment Company had the following transactions for the month ending January 31, 2018. Morning Bean’s cash balance on January 1, 2018, was \(11,800. Jan. 1 Common stock was issued to stockholders for \)5,000 cash. 7 Purchased equipment for \(2,400 on account. 14 Paid \)19,000 cash for land. 17 Paid cash expenses: employees’ salaries, \(1,300; office rent, \)1,600; utilities, \(450. 23 Paid cash dividends of \)500. 26 Earned service revenue for the month, $8,500, receiving cash. Prepare the statement of cash flows of Morning Bean Food Equipment Company for the month ended January 31, 2018

Step-by-Step Solution

Answer

The cash flow statement is shown as follows:

Bean Food Equipment Company
Statement of Cash Flows
Month Ended January 31, 2018
Cash flows from operating activities:
Receipts:
Collections from customers		$8,500
Payments
To rent	$(1,600)
To utilities	(450)
To employees	(1,300)	(3350)
Net cash provided by operating activities		5150
Cash flows from investing activities:
Purchase of land	(19,000)
Net cash used by investing activities		(19,000)
Cash flows from financing activities:
Issued common stock	5,000
Payment of cash dividend	(500)
Net cash provided by financing activities		4,500
Net decrease in cash		(9,350)
Cash balance, July 1, 2018		11,800
Cash balance, July 31, 2018		$2,450

Step 1: Explanation on Statement of Cash Flows

Staement of cash flows records the transactions of cash nature, classifying into three categories namely operating, investing and financing activities.

Step 2: Statement of cash flows

Cash flow from operating activities equals $5,150, cash flow from investing activities equals ($19,000), cash flow from financing activities equals $4,500 and net decrease in cash equals ($9,350).