Chapter 14: Q11SE (page 772)

Preparing a statement of cash flows using the direct method Jelly Bean, Inc. began 2018 with cash of $58,000. During the year, Jelly Bean earned revenue of $595,000 and collected $614,000 from customers. Expenses for the year totaled $427,000, of which Jelly Bean paid $212,000 in cash to suppliers and $205,000 in cash to employees. Jelly Bean also paid $148,000 to purchase equipment and a cash dividend of $57,000 to its stockholders during 2018. Prepare the company’s statement of cash flows for the year ended December 31, 2018. Format operating activities by the direct method.

Expert verified

Net Increase/(Decrease) in cash is ($8,000).

Step by step solution

Cash flows from operating activities
Receipts:
Collection from customers	$614,000
Payments:
To suppliers	($212,000)
To employees	($205,000)
Net cash provided by operating activities		$197,000

Jelly Bean Inc. Statement of cash flows Year ended 31st December, 2018
Cash flows from operating activities		$197,000

Cash flows from investing activities
Cash purchase of equipment	($148,000)
Net cash used for investing activities		($148,000)

Cash flows from financing activities
Cash payment of dividends	($57,000)
Net cash provided by financing activities		($57,000)
Net Increase/(Decrease) in cash		($8,000)
Cash balance, December 31, 2017		$58,000
Cash balance, December 31, 2018		$50,000

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