Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operat
ID: 2378934 • 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 companys balance sheets and income statement follow.
The loss on the cash sale of equipment was $5,500 (details in b).
Sold equipment costing $47,250, with accumulated depreciation of $30,000, for $11,750 cash.
Purchased equipment costing $99,250 by paying $30,000 cash and signing a long-term note payable for the balance.
Borrowed $3,000 cash by signing a short-term note payable.
Paid $50,000 cash to reduce the long-term notes payable.
Issued 2,350 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $57,500.
Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The companys balance sheets and income statement follow.
Prepare a complete statement of cash flows: report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)Explanation / Answer
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Please find the answer as follows:
Thanks.
Cash flows from operating activitiesNet Income $1,11,700 Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation Expense 20,000 Loss on Sale of Equipment 5,500 Increase in accounts receivable (7,840) Increase in inventory (25,500) Decrease in prepaid expenses 400 Decrease in accounts payable (52,010) Net cash operating activities $52,250
Cash flows from investing activities
Cash paid for equipment ($30,000) Cash received from sale of equipment 11,750 Net cash investing activities ($18,250)
Cash flows from financing activities
Cash borrowed on short-term note $3,000 Cash paid on long-term note (50,000) Cash received from issuing stock 47,000 Cash paid for dividends (57,500) Net cash financing activities ($57,500)
Net decrease in cash (23,500) Cash balance at beginning of 2011 73,500 Cash balance at end of 2011 $50,000
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