I did part 1, I need help with the 2nd part of the question. Suppose the income

Question

I did part 1, I need help with the 2nd part of the question. Suppose the income statement for Goggle Company reports $135 of net income, after deducting depreciation of $25. The company bought equipment costing $110 and obtained a long-term bank loan for $120. Required 1. Calculate the change in each balance sheet account and indicate whether each account relates to operating, investing, and/or financing activities +for increase and for decrease). (Select "NE" if there is no effect. Enter all amounts as positive values.) Previous Year Current Year Change Type 45 $ Cash Accounts Receivable Inventory Equipment Accumulated Depreciation - Equipmert 320 195 145 165 Operating 660 (60)f+25 +275 Financing 110 Operating 85 310 550 (35) 955 $ 110 Investing 25 Operating Total Salaries and Wages Payable Notes Payable (long-term) Common Stock Retained Earnings 1,260 7050 Operating 120 Financing 0 Financing 135 Operating 455 575 20 460 955$ 20NE 595 Total 1,260

Explanation / Answer

2.

6. As the cash flow is positive it cannot be for a stratup or a troubled company (as both these companies report a net decrease in cash).

Thus the answer is the 2nd option i.e. "healthy company".

Cash Flows from Operating activities Net income 135 Adjustments to Reconcile Net Income to Net Cash provided by operating activities Depreciation 25 Total 25 Changes in Current assets and current liabilities Increase in accounts receivable -110 Decrease in inventory 165 Increase in salaries and wages payable 50 Total 105 Net cash flow from operating activities 265 Cash flows from investing activities: Equipment purchased -110 Total -110 Net cash flow from investing activities -110 Cash flows from financing activities: Paid bank loan 120 Total 120 Net cash flow from financing activities 120 Opening cash balance 45 Closing cash balance 320.00 Net increase in cash 275.00

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