Question

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

(1) Revenues of $117,000 were earned and received in cash.
(2) Bank loans of $15,750 were paid off.
(3) Equipment of $37,000 was purchased with cash.
(4) Expenses of $72,100 were paid.
(5) Stockholders purchased additional shares for $41,000 cash.


Make a cash flow statement for above information.

Answer 1

The purchase of equipment with cash falls under investing activities. The payment of bank loans and the purchase of additional shares for cash fall under financing activities. The net change in cash is the sum of the net cash flows from all three sections.

Step-by-step explanation:

In order to make a cash flow statement for Boyce Company based on the given information, we need to categorize the transactions into three main sections: operating activities, investing activities, and financing activities.

1. Operating activities: The revenues earned and received in cash ($117,000) and the expenses paid ($72,100) fall under this section. The net cash flow from operating activities is the difference between the cash inflows and outflows, which is ($117,000 - $72,100) = $44,900.

2. Investing activities: The purchase of equipment with cash ($37,000) is considered an investment and falls under this section. The net cash flow from investing activities is the cash outflow, which is ($37,000).

3. Financing activities: The payment of bank loans ($15,750) and the purchase of additional shares for cash ($41,000) are classified as financing activities. The net cash flow from financing activities is the difference between the cash inflows and outflows, which is ($41,000 - $15,750) = $25,250.

Finally, we can calculate the net change in cash by summing up the net cash flows from all three sections: ($44,900 + (-$37,000) + $25,250) = $33,150.