Question

A company provides the following information related to its cash flows during the year. Inflows: Issue common stock $91,000, sell inventory to customers $112,000, issue notes payable $44,000, sell land $70,000, earn interest on investments $3,000, sell patent $57,000. Outflows: Purchase equipment $145,000, purchase inventory $48,000, purchase treasury stock $31,000, repay notes payable $68,000, pay salaries $59,000, pay dividends $12,000. Beginning cash $53,000.

Calculate:
a. Operating cash flows
b. Investing cash flows
c. Financing cash flows
Calculate the ending cash balance.

Answer 1

The operating cash flows are $8,000. The investing cash flows are -$18,000. The financing cash flows are $55,000. The ending cash balance is $98,000.

Step-by-step explanation:

To calculate the operating cash flows, we need to add the inflows and outflows related to the company's core operations. In this case, the inflows are: selling inventory to customers ($112,000) and earning interest on investments ($3,000). The outflows are: purchasing inventory ($48,000) and paying salaries ($59,000). So, the operating cash flows are $112,000 + $3,000 - $48,000 - $59,000 = $8,000.

The investing cash flows can be calculated by adding the inflows and outflows related to the acquisition and sale of long-term assets. In this case, the inflows are: selling land ($70,000) and selling a patent ($57,000). The outflow is: purchasing equipment ($145,000). So, the investing cash flows are $70,000 + $57,000 - $145,000 = -$18,000.

The financing cash flows can be calculated by adding the inflows and outflows related to the company's financing activities. In this case, the inflows are: issuing common stock ($91,000) and issuing notes payable ($44,000). The outflows are: repaying notes payable ($68,000) and paying dividends ($12,000). So, the financing cash flows are $91,000 + $44,000 - $68,000 - $12,000 = $55,000.

To calculate the ending cash balance, we need to add the beginning cash balance ($53,000) to the sum of the operating cash flows, investing cash flows, and financing cash flows. So, the ending cash balance is $53,000 + $8,000 - $18,000 + $55,000 = $98,000.