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Chapter 1: Q38E (page 43)

Morning Bean Food Equipment Company had the following transactions for the month ending January 31, 2018. Morning Bean’s cash balance on January 1, 2018, was \(11,800. Jan. 1 Common stock was issued to stockholders for \)5,000 cash. 7 Purchased equipment for \(2,400 on account. 14 Paid \)19,000 cash for land. 17 Paid cash expenses: employees’ salaries, \(1,300; office rent, \)1,600; utilities, \(450. 23 Paid cash dividends of \)500. 26 Earned service revenue for the month, $8,500, receiving cash. Prepare the statement of cash flows of Morning Bean Food Equipment Company for the month ended January 31, 2018

Short Answer

Expert verified

The cash flow statement is shown as follows:

Bean Food Equipment Company

Statement of Cash Flows

Month EndedJanuary 31, 2018

Cash flows from operating activities:

Receipts:

Collections from customers

$8,500

Payments

To rent

$(1,600)

To utilities

(450)

To employees

(1,300)

(3350)

Net cash provided by operating activities

5150

Cash flows from investing activities:

Purchase of land

(19,000)

Net cash used by investing activities

(19,000)

Cash flows from financing activities:

Issued common stock

5,000

Payment of cash dividend

(500)

Net cash provided by financing activities

4,500

Net decrease in cash

(9,350)

Cash balance, July 1, 2018

11,800

Cash balance, July 31, 2018

$2,450

Step by step solution

01

Explanation on Statement of Cash Flows

Staement of cash flows records the transactions of cash nature, classifying into three categories namely operating, investing and financing activities.

02

Statement of cash flows

Cash flow from operating activities equals $5,150, cash flow from investing activities equals ($19,000), cash flow from financing activities equals $4,500 and net decrease in cash equals ($9,350).

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Most popular questions from this chapter

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.

Using the accounting equation for transaction analysis and preparing financial statements Allen Shonton recently opened his own accounting firm on April 1, which he operates as a corporation. The name of the new entity is Allen Shonton, CPA. Shonton experienced the following events during the organizing phase of the new business and its first month of operations in 2018: Apr. 5 Shonton deposited \(75,000 in a new business bank account titled Allen Shonton, CPA. The business issued common stock to Shonton. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(9,500. 10 Consulted with tax client and received \)4,000 for services rendered. 11 Paid utilities, \(190. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)20,000. 18 Paid office rent, \(750. 25 Received amount due from client that was billed on April 12. 27 Paid full amount of accounts payable created on April 7. 30 Cash dividends of \)3,500 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Allen Shonton, 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.

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Prepare the statement of retained earnings for Damon Design Studio for the year ending December 31, 2018.

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