Question

During Year 2, Chico Company earned $2,300 of cash revenue, paid $1,050 of cash expenses, and...

During Year 2, Chico Company earned $2,300 of cash revenue, paid $1,050 of cash expenses, and paid a $550 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?

a) Net income amounted to $1,250.

b) Total assets increased by $700.

c) Cash inflow from operating activities was $1,250.

d) Cash outflow from financing activities was $700.

Business   Accounting   
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Answer #1

Option (d) is the answer

From the below calculations, we can see that option (d) is incorrect and hence it is the answer.

Net income = Cash revenue - Cash expenses

Net income = $2300 - $1050 = $1250

Assets increase = Cash received from revenue - Csash paid for expenses - Cash paid for dividend

Assets increase = $2300 - $1050 - $550 = $700

Cash flows from operating activities = Cash revenue - Cash expenses

Cash flows from operating activities = $2300 - $1050 = $1250

Cash flows from financing activities = Cash dividend paid

Cash flows from financing activities = - $550 (outflow)

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