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Chapter 1: Q15SE (page 36)

Polk Street Homes had the following cash transactions for the month ended July 31, 2018.

Cash receipts:

Collections from customers $ 25,000

Issued common stock 13,000

Cash payments:

Rent 500

Utilities 2,000

Salaries 1,500

Purchase of equipment 25,000

Payment of cash dividends 4,000

Cash balance, July 1, 2018 14,000

Cash balance, July 31, 2018 19,000

Prepare the statement of cash flows for Polk Street Homes for the month ended

July 31, 2018.

Short Answer

Expert verified

The cash flow statement is shown as follows:

Polk Street Homes
Statement of Cash Flows
Month Ended July 31, 2018

Cash flows from operating activities:

Receipts:

Collections from customers

$25,000

Payments

To rent

$(500)

To utilities

(2,000)

To employees

(1,500)

(4,000)

Net cash provided by operating activities

21,000

Cash flows from investing activities:

Purchase of equipment

(25,000)

Net cash used by investing activities

(25,000)

Cash flows from financing activities:

Issued common stock

13,000

Payment of cash dividend

(4,000)

Net cash provided by financing activities

9,000

Net increase in cash

5,000

Cash balance, July 1, 2018

14,000

Cash balance, July 31, 2018

$19,000

Step by step solution

01

Explanation on Statement of Cash Flows

It is the part of the financial statements, which reports the net change in the cash balance of the business, by recording all cash transactions for the period.

02

Statement of cash flows

Cash flow from operating activities equals $21,000, cash flow from financing activities equals ($25,000), cash flow from financing activities equals $9,000 and net increase in cash equals $5,000.

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Most popular questions from this chapter

Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

List the four financial statements. Briefly describe each statement.

Abby Perry recently opened her own law office on December 1, which she operates as a corporation. The name of the new entity is Abby Perry, Attorney. Perry experienced the following events during the organizing phase of the new business and its first month of operation, December 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Dec. 1 Sold personal investment in Nike stock, which she had owned for several years, receiving \(30,000 cash. 2 Deposited the \)30,000 cash from the sale of the Nike stock in her personal bank account. 3 Deposited \(89,000 cash in a new business bank account titled Abby Perry, Attorney. The business issued common stock to Perry. 5 Paid \)600 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(8,000, within three months. 9 Received \)2,900 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(300. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)8,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(900. 31 Received \)2,800 cash from clients billed on Dec. 23. 31 Cash dividends of $3,000 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Abby Perry, Attorney. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet. d. Statement of cash flows.

Preparing the balance sheet Requirements 1. Prepare the balance sheet for Wilson Towing Service as of June 30, 2018. 2. What does the balance sheet report?

What are two certifications available for accountants? Briefly explain each certification.

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