P2. David opened an IT Services Business on January 1, 2015 by investing $40,000
ID: 2522613 • Letter: P
Question
P2. David opened an IT Services Business on January 1, 2015 by investing $40,000 of her own money. Cash balance as of Jan. 1, 2017 was $12,000. During 2017, Jan had the following transactions 1) Borrowed $40,000 from bank by issuing a 5-year note. 2) Provided $150,000 of services, collected $120,000 of it, the rest was on account 3) Sold its old equipment at book value, $2,000 in cash 4) Purchased new equipment for $25,000 in cash. 5) Paid $6,000 for utilities- phone, electricity, water, etc. 6) Paid $4,000 to bank, of which $1,200 was for interest and the rest was for payoff of principal of a loan. 7) Took $10,000 as dividend. 8) Purchased $3000 supplies, paid $2,000 in cash and the rest was on account 9) Paid $12,000 for rent. 10) Recorded $4,000 depreciation expense on equipment. 11) Paid $4,000 to IRS for income tax. 12) Paid herself $70,000 as salaries. 13) Recorded $2,200 used up supplies at the end of the year. Prepare an organized Statement of Cash Flows in the space provided on Answers SheetExplanation / Answer
STATEMENT OF CASH FLOWS PARTICULARS AMOUNT AMOUNT CASH FLOWS FROM OPERATING ACTIVITIES REVENUE FROM SERVICES - CASH COLLECTED 120000 PAYMENT FOR UTILITIES -6000 PURCHASE OF SUPPLIES - CASH PAID -2000 RENT PAID -12000 SALARY PAID TO SELF -70000 CASH FROM OPERATIONS 30000 INCOME TAX -4000 NET CASH FLOWS FROM OPERATING ACTIVITIES 26000 CASH FLOWS FROM INVESTING ACTIVITIES SALE OF ASSET - CASH RECEIVED 2000 PURCHASE OF NEW EQUIPMENT - CASH PAID -25000 NET CASH FLOWS FROM INVESTING ACTIVITIES -23000 CASH FLOWS FROM FINANCING ACTIVITIES BANK BORROWING 40000 INTEREST ON LOAN PAID -1200 PAYMENT OF PRINCIPAL (4000-1200) -2800 RECEIPT OF DIVIDEND 10000 NET CASH FLOWS FROM FINANCING ACTIVITIES 46000 NET CASH FLOWS DURING YEAR 49000 OPENING BALANCE OF CASH AND ITS EQUIVALENTS 12000 CLOSING BALANCE OF CASH AND ITS EQUIVALENTS 61000
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