Question

During the month of August, Boyce Company had the following transactions:

(1) Revenues of $120,000 were earned and received in cash.
(2) Bank loans of $18,000 were paid off.
(3) Equipment of $40,000 was purchased with cash.
(4) Expenses of $73,600 were paid.
(5) Stockholders purchased additional shares for $44,000 cash.

Make a cash flow statement for above information.

Answer 1

To create a cash flow statement, categorize the transactions into operating, investing, and financing activities. Calculate the net cash provided/used for each activity and then add them to find the net increase/decrease in cash.

Step-by-step explanation:

To create a cash flow statement based on the given information, we need to categorize each transaction into three sections: operating activities, investing activities, and financing activities.

Operating activities:

• Revenues of $120,000 earned and received in cash
• Expenses of $73,600 paid

Investing activities:

• Equipment of $40,000 purchased with cash

Financing activities:

• Bank loans of $18,000 paid off
• Stockholders purchased additional shares for $44,000 cash

To summarize these activities:

• Net cash provided by operating activities: $46,400 ($120,000 - $73,600)
• Net cash used in investing activities: $40,000 (purchase of equipment)
• Net cash provided by financing activities: $26,000 ($18,000 + $44,000)

Finally, we can calculate the net increase in cash by adding these figures:

• Net increase in cash: $32,400 ($46,400 + -$40,000 + $26,000)

Therefore, the cash flow statement for Boyce Company based on the given information is:

• Net increase in cash: $32,400