Question

State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows: a. Retired $230,000 of bonds, on which there was $2,300 of unamortized discount, for $239,000. b. Sold 7,000 shares of $20 par common stock for $48 per share. C. Sold equipment with a book value of $48,200 for $69,400. d. Purchased land for $452,000 cash. e. Purchased a building by paying $95,000 cash and issuing a $90,000 mortgage note payable. f. Sold a new issue of $230,000 of bonds at 99. g. Purchased 6,200 shares of $35 par common stock as treasury stock at $65 per share. h. Pald dividends of $2.00 per share. There were 32,000 shares issued and 5,000 shares of treasury stock, Effect Amount Cash payment $ 239,000 Cash receipt Cash receipt Cash payment Cash payment Cash recept Cash payment Cash payment

Answer 1

Ans1 Sr. No. Effect а Cash Payment b Cash Receipt Cash Receipt Cash Payment Cash Payment Cash Receipt Cash Payment Cash Payment Note: No dividend is paid on treasury stock. od 10 Amount $239,000 $336,000 (7000 x $48] $69,400 $452,000 $95,000 $227,700 ($230000/100 x 90] $403,000 (6200 x $65] $54,000 [(32000-5000) < $2] Ans 2 A Cash flow statement provides the following information: 1) Information about company's cash receipt and cash payment during an accounting period. 2) Information about company's operating, investing and financing activities. 3) Information access the company's liquidity, solvency and financing flexibility. Under the indirect method, net income is converted operating cash flow by making adjustments for the transaction that effect net income but are non cash transactions. The adjustment includes eliminating non cash expenses, non operating items and the changes in the balance sheet account on account of accrual accounting events. > Cash flow from operating activities (CFO), consists of the inflows and outflows of cash resulting from revenue and expense transactions that affect a firm's net income. > Cash flow from investing activities (CFI) consists of the inflow and outflows of cash resulting from the acquisition of long term assets and investment. > Cash Flow from financing activities (CFF) consists of the inflow and outflows of cash resulting from transactions affecting a firm's capital structure.

Amount $312,800 Statement of Cash Flows (partia) Particulars Amount Cash Flow from Operating Activity Net Income Adjustment reconcile net income net cash flow from operating activities Add: Depreciation Expense $105,240 Decrease in Accounts Receivable $7,090 Increase in inventory ($18,910) Decrease in Prepaid nsurance $2,110 Decrease in accounts payable ($8,680) Increase in salaries payable $3,120 Changes in Working Capital Net Cash from Operating Activity Working Particulars End of year $89,970 $402,770 Beginning of year (B) Assets (A) Accounts Receivable $112,220 $119,310 inventory $214,170 $195,260 Prepaid expenses $12,740 $14,850 Accounts Payable $95,690 $104,370 Salaries Payable $15,720 $12,600 Increase in Current Assets is Cash Outflow and Decrease in Current Assets in Cash Inflow Increase in Current Liability is Cash Inflow and Decrease in Current Liability in Cash Outflow Increase /(Decrease) (A) - (B) ($7,090) $18,910 ($2,110) ($8,680) $3,120