Concept explainers
Cash flow statement is that statement in which, transaction related to cash are recorded. It is mandatory report and included in the financial statement of the company. It is divided into three parts operating activities, investing activity, and financial activity
Operating Activity:
Operating activity is the first part of the cash flow statement. The main focuses of the operating activity on the
Financial Activity:
Financial activity is the part of the cash flow statement. Financial activity involves the long term liability, borrowing and
Investing Activity:
Investing activity is the third part of the cash flow statement which gives the information related to the acquisition and disposal of the long term assets of the company such as land and building, investment and plant.
To prepare: Cash flow statement
Explanation of Solution
Cash flow statement (Direct method)
Cash flow statement | Amount($) | Amount($) |
Cash flow from operating activities: | ||
Cash collected from customers | 664,000 | |
Cash paid to suppliers | (393,300) | |
Cash paid for other expense | (75,000) | |
Cash paid for income tax | (44,290) | |
Cash flow from operating activities(A) | 151,410 | |
Cash flow from investing activities: | ||
Cash received on sale of the equipment | 10,000 | |
Cash paid for new equipment | (57,600) | |
Cash flow from investing activities(B) | (47,600) | |
Cash flow from financing activities: | ||
Cash from issuance of share | 60,000 | |
cash paid on retirement | (30,000) | |
Cash paid for dividend | (90,310) | |
Cash flow from financing activities(C) | (60,310) | |
Net increase in cash | 43,500 | |
Cash and cash equivalent, December 31,2016 | 44,000 | |
Cash and cash equivalent, December 31,2017 | 87,500 |
Table (1)
Working notes:
Calculate the cash collected from the customer,
Calculate the cash paid to supplies,
Calculate the cash paid for other expenses,
Calculate the cash paid for income tax expense:
Calculate the cash received as dividend,
Calculate the cash received on sale of the equipment,
particular | Amount(S) |
Accumulated depreciation 2016 | 9,000 |
Add: Depreciation for the year | 58,600 |
Less: Accumulated depreciation | (27,000) |
Depreciation on equipment sold | 40,600 |
Original cost of the equipment sold | 48,600 |
Less: Depreciation on equipment | (40,600) |
Book value of the equipment sold | 8,000 |
Add: Gain on sale | 2,000 |
Cash received on sale of equipment | 10,000 |
Table (2)
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Chapter 12 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
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