pany s quidity in 2014! 7-31 You have been hired by Seeser Flappits Company to p

Question

pany s quidity in 2014! 7-31 You have been hired by Seeser Flappits Company to prepare its 2014 cash flow state- ment. The company provides you with its 2014 income statement as follows: Sales (net) Cost of goods sold Gross profit Salaries expense$19,200 Depreciation expense.2.800 Other expenses (all cash). $56,600 (31.400) . 1,000 Total operating expenses.... Net Income aee.... (23.000) S2.200 You determine that these numbers are correct. You review the company's 2014 begin- ning and ending balance sheets and find that the cash balance was $1.900 on January I. 2014, and $5, 100 on December 31, 2014. In addition, you find the following changes: Accounts receivable Inventory Accounts payable Salaries payable $4,200 decrease 5,600 decrease 2.500 decrease 1,200 increase Furthermore, you determine that during 2014, the company sold equipment for $4.800, purchased land for $13,000, and issued a note payable for $7.500, all for cash. The owner also withdrew $9,600. After all these changes, the company had average total assets of $74,000 for 2014 Required: (1) Using your findings. prepare the company's 2014 cash flow statement (use the direct method for operating cash flows). (2) Compute the company's 2014 cash return on total assets

Explanation / Answer

Cash Flow statement

for the year ended 2014

**payment to supplied = cost of goods sold - decrease in inventory +decrease i payable

          = 31400-5600+2500

             = 28300

salary paid : salary expense -salary payable increase

          = 19200-1200

           = 18000

2)cash return on asset =cash flow from operations /total asset

           = 13500/74000

             = .1824 or 18.24%

Cash Flow statement

for the year ended 2014

cash flow from operating activity collections from receivables [56600+4200] 60800 lesS:cash payment payment to supplier (28300) salary paid (18000) other expense (1000) cash flow from operating activity [A] 13500 cash flow from investing activity Sale of equipment 4800 purchase of land (13000) cash flow from investing activity [B] (8200) CASh flow from financing activity Drawing s made (9600) note payable issued 7500 net cash flow from financing activity [C] (2100) Net increase/(decrease) in cash [A+B+C] 3200 BEginning cash balance 1900 Balance at end 5100

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