Question

Sye Chase started and operated a small family architectural firm in Year 1. The firm was affected by two events: (1) Chase provided $25,000 of services on account, and (2) he purchased $2,800 of supplies on account. There were $250 of supplies on hand as of December 31, Year 1.

What is the value of supplies used during the year?

What is Sye's Cash Flow from Operating Activity?

Answer 1

Answer: 1) Value of supplies used during the year= $2,550

2) Cash flow from Operating activities = Nil

Explanation:

Value of Supplies used during the year

Particulars	Amount ($)
Opening balance of supplies on hand	-
Add: Purchase of supplies during the year	$2,800
Value of supplies available for use	$2,800
Less: Closing Balance of supplies on hand	$250
Value of supplies used during the year	$2,550

Cash flow from Operating activities

Particulars	Amount ($)
Proceed from performance of services (See note-1)	-
Paid for Purchase of Supplies (See note-2)	(-)
Net cash flow from operating activities	-

Note:

1) Since services are performed on account, no cash is received from customer. therefore, cash inflow from service performed is zero.

2) Since supplies are purchased on account, no cash payment is made. therefore, cash outflow from purchase of supplies is zero.