2102AFE Financial Accounting
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Topic 9 - Statement of Cash Flows
Question 1: Financial Statements all have a goal. The cash flow statement does as well.
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Requirements: Describe how the cash flow statement helps investors and creditors perform each of the following functions:
Answer: Requirement 1:
a. Predict future cash flows
The statement of cash flows helps in prediction of the cash flows by providing information in regard to reporting of the cash receipts and cash payments of the past period which also provide predictable information in regard to the cash receipts and the cash payments of the future period.
b. Evaluate management decisions
The Cash Flow Statement helps the management in the evaluation of the decisions of the management by providing information to the management in regard to the inflow of cash and the usage of the cash in the business.
c. Predict the ability to make debts payments to lenders and to pay dividends to shareholders.
The Cash Flow Statement provides information with respect to the availability of the cash in the business thus providing for the liquidity position and also the repaying capacity of the business hence also provides the cash available with the business to repay the loan amount and the interest.
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Question 2: Jelly Bean Ltd began 2015 with cash of $53,000. During the year, Jelly Bean earned revenue of $597,000 and collected $621,000 from customers. Expenses for the year totalled $437,000, of which Jelly Bean paid $427,000 in cash to suppliers and employees. Jelly Bean also paid $145,000 to purchase equipment and a cash dividend of $54,000 to its shareholders during 2015.
Requirement: Prepare the company's cash flow statement for the year ended 31 December 2015. Format operating activities by the direct method.
Answer: Requirement 1:
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JELLY BEAN LTD
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Cash flow statement
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for the year ended 31 December 2015
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Cash flows from operating activities:
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Receipts from the customers by way of collections
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621000
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Payments to the suppliers
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(427000)
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Net cash provided by operating activities
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194000
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Cash flows from investing activities:
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Cash payment for the equipment acquisition
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(145000)
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Net cash used for investing activities
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(145000)
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Cash flows from financing activities:
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Dividend payment
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(54000)
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Net cash used for financing activities
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(54000)
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Net increase in cash
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(5000)
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Cash balance, 31 December 2014
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53000
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Cash balance, 31 December 2015
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48000
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Lists of courses which are covered under Griffith University assignment help and assessment help services, such as:
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