Question

A company is formed by issuing common stock for $1,000 in cash and then transacts as follows over its first five days of business, with all purchases and sales on credit:

Day 1 - Buys one unit of inventory for $10.

Day 2 - Buys one unit of inventory for $15.

Day 3 - Buys one unit of inventory for $20.

Day 4 - Sells one unit of inventory for $100.

Day 5 - Sells two units of inventory for $100 each.

Prepare in simplified form, a statement of cash flows for the company's first four and first five days of operations of operations, respectively, assuming that the company uses FIFO and then, alternatively, that it uses LIFO.

Cash Flows from Operating Activities: EoD4 FIFO? EoD4 LIFO? EoD5 FIFO? EoD5, LIFO?

NI: EoD4 FIFO? EoD4 FIFO? EoD4 LIFO? EoD5 FIFO? EoD5, LIFO?

NET CASH FLOWS FROM OP INC: EoD4 FIFO? EoD4 LIFO? EoD5 FIFO? EoD5, LIFO?

NET CASH FLOWS FROM INV ACT: EoD4 FIFO? EoD4 LIFO? EoD5 FIFO? EoD5, LIFO?

NET CASH FLOWS FROM FINC ACT: EoD4 FIFO? EoD4 LIFO? EoD5 FIFO? EoD5, LIFO?

NET CHANGE IN CASH: ?

CASH, BEGINING: ?

CASH, ENDING: ?

Answer 1

First four days operations;	$	$
Sales;
Sale of inventory ( 1 units x $ 100 )		100
Less: cost of goods sold ( FIFO method )
Day 1 purchase of one unit of inventory	10
Total cost of goods sold		10
Gross profit		90
First five days operations;	$	$
Sales;
Sale of inventory ( 1 units x $ 100 )	100
Sale of inventory ( 2 units x $ 100 )	200
Total sales revenue		300
Less: cost of goods sold ( FIFO method )
Day 1 purchase of one unit of inventory	10
Day 2 purchase of one unit of inventory	15
Day 3 purchase of one unit of inventory	20
Total cost of goods sold		45
Gross profit		255
Cash flow from operating activity for the first four and five days will be zero because all purchases and and sales are on credit. No cash inflow and outflow is happened.