A merchandising company began in 2019 with $10,000 in cash and reported net income of $6,700 on its 2019 income statement.
During the year a loss of $250 was reported on the cash sale of a piece of equipment with a book value of $1,000. A new piece of equipment was purchased at a cost of $8,500 to replace the equipment that was sold. The company paid $1,500 from its available cash balance to purchase the equipment and took out a cash long-term note payable from its bank for the remaining balance.
All dividends declared during 2019 were paid in 2019. There was not a balance in the dividends payable account at the beginning of the year. There was a $250 net decrease in retained earnings during the year.
Given a reported positive cash flow of $500 from its operating activities during the year, which of the following statements is incorrect?
A.
The company’s cash decreased by $7,200 during the year.
B.
The ending cash reported on the balance sheet was $2,800.
C.
The company operated within its means during the year.
D.
The company’s net cash flows from financing activities were $50.
E.
The company’s investing activities used $750 more in cash than they provided.
Answer) D. The company's net cash flows from financing activities were $50.
Workings:
The company's net cash flows from financing activities were ($6950)
Net Cash provided by Operating activities | 500 | |
Cash flow from Investing Activities: | ||
Sale of Land | ||
Purchase of Equipment | -1500 | |
Sale of Equipment | 750 | |
Net cash flows from Investing activities | -750 | |
Cash flow from Financing Activities: | ||
Cash Dividends paid | -6950 | |
Net cash flows from Financing activities | -6950 | |
Net Increase in Cash | -7200 | |
Cash, Beginning Balance | 10000 | |
Cash, Ending Balance | 2800 | |
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