An inexperienced accountant for Prestwick Company prepared the following income statement for the month of August 2015:

Question:

An inexperienced accountant for Prestwick Company prepared the following income statement for the month of August 2015:
PRESTWICK COMPANY
AUGUST 31, 2015
  Revenues:
       Services provided to customers$17,000
       Investment by stockholders5,000
       Loan from bank15,000$37,000
  Expenses:
       Payments to long-term creditors$11,700
       Expenses required to provide services to customers7,800
       Purchase of land16,00035,500
  Net income$1,500
Based on the information prepare a statement of cash flows in a form consistent with generally accepted accounting principles. You may assume all transactions were in cash and that the beginning cash balance was $7,200. (List any deduction in cash and cash outflows as negative amounts.)

Answer:

Statement of Cash flows
Cash flows from Operating activities:
Cash received from revenues17000
Cash paid for expenses-7800
Net Cash provided by Operating activities9200
Cash flows from Investing activities:
Cash paid for purchase of Land-16000
Net Cash used in Investing activities-16000
Cash flows from Financing activities:
Cash received from bank loan15000
Cash received from investment by stockholders5000
Cash paid to long term creditors-11700
Net Cash provided by Financing activities8300
Increase in cash1500
Beginning cash balance7200
Ending cash balance8700

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