Question

Alvie Heating & Air experienced the following events during Year 2:

1. Acquired $50,000 cash from the issue of common stock
2. Paid $20,000 cash to purchase land
3. Borrowed $40,000 cash
4. Provided services for $60,000 cash
5. Paid $12,000 cash for rent expense
6. Paid $18,000 cash for other operating expenses
7. Paid 10% interest on the Note Payable
8. Paid a $5,000 cash dividend to the stockholders
9. Determined that the market value of the land purchased in Event 2 is now $16,500

The January 1, Year 2 account balances are $15,000 Cash, $10,000 Land and $25,000 Common Stock.

1.What is the balance of the Cash account displayed on the Balance Sheet for Year 2?

2. What is the value of the Net Cash Flows from Financing Activities?

brief explanation please.

Answer 1

(1)

Cash Account

Opening balance of cash	$15,000	purchase land	$20,000
Issue of common stock	50,000	Rent	12,000
Borrowed	40,000	Operating expenses	18,000
Services provided	60,000	Interest on note payable i.e borrowed amount (10% of $40,000= $4,000)	4,000
		Cash dividend paid	5,000
		Closing balance	106,000
Total	165,000	Total	165,000

Cash account displayed on the balance sheet for year 2 = $106,000

(2) Net Cash flow from financing activities

Financing activities are activities that result in changes in the size and composition of the owners' capital and borrowing of the enterprise.

Financing Activities:
Issued common stock	$50,000
Borrowed	40,000
Less: interest paid (10 %of $40,000)	(4,000)
Less: dividend paid	(5,000)
Net cash flow from financing activities	$81,000

Thank you :)