Question

A merchandising company began in 2019 with​ $10,000 in cash and reported net income of​ $6,700...

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.

Homework Answers

Answer #1

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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