Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operat
ID: 2374713 • Letter: K
Question
Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company%u2019s balance sheets and income statement follow.
The loss on the cash sale of equipment was $5,375 (details in b).
Sold equipment costing $47,250, with accumulated depreciation of $30,375, for $11,500 cash.
Purchased equipment costing $99,250 by paying $30,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $50,500 cash to reduce the long-term notes payable.
Issued 1,100 shares of common stock for $20 cash per share.
Prepare a complete statement of cash flows; report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)
Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company%u2019s balance sheets and income statement follow.
Explanation / Answer
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Net Income 119125 Add Depreciation 20000 Add Decrease in Prepaid Expenses 500 Less Increase in Accounts Receivable -10820 Less Increase in Merchandise Inventory -24000 Less Decrease in Accounts Payable -39480 Add Increase in Short Term Notes Payable 4000 Add Loss on Sale of Equipment 5375 Cash Flow Provided By Operating Activities 74700
Cash Flow from Investing Activities
Cash received from sale of equipment 11500 Cash used to purchase equipment -30000 Net cash flows used by investing activities -18500
Cash flows for financing activities
Cash received from issuance of common stock 22000 Cash used to pay long-term note payable -50500 Cash used to pay dividends -51400 Net cash flows used by Financing Activities -79900
Decrease in Cash (74700 -18500 - 79900) -23700 Add Opening Cash Balance 73500
Closing Cash Balance (-23700 + 73500) 49800
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