Please help with this assessment please! Assessment Assignment ACCT 202 The net
ID: 2476509 • Letter: P
Question
Please help with this assessment please!
Assessment Assignment ACCT 202
The net income reported on the income statement for the current year was $128,000. Depreciation recorded on store equipment for the year amounted to $21,100. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year
Beginning of Year
Cash
$51,200
$47,100
Accounts receivable (net)
36,710
34,810
Merchandise inventory
50,120
52,990
Prepaid expenses
5,630
4,470
Accounts payable (merchandise creditors)
47,970
44,560
Wages payable
26,210
29,110
i) Based on the preceding information, convert relevant information into mathematical forms, consistently appropriate for the task at hand by preparing the Cash Flow from Operating Activities section of the statement of cash flows, using the indirect method.
iI) Express quantitative information to show an understanding, and or purposes of your work by for instance explaining why net cash flows from operating activities is different from net income.
iii) Provide an accurate, full and complete explanation and implication of the information presented in (mathematical forms) by explaining the significance of the cash flow statement
iv) Engage in a comprehensive process that uses the quantitative analysis of data as the basis for making judgments, drawing accurate conclusions from this work by providing an opinion of how well the company is doing financially.( for instance was there and net cash inflow or outflow).
End of Year
Beginning of Year
Cash
$51,200
$47,100
Accounts receivable (net)
36,710
34,810
Merchandise inventory
50,120
52,990
Prepaid expenses
5,630
4,470
Accounts payable (merchandise creditors)
47,970
44,560
Wages payable
26,210
29,110
Explanation / Answer
Ans i Statement of Cash Flows Calculation Year Cash flows from operating activities Net Income 128,000.00 Adjustments for: Add: Depreciation 21100 Working capital changes: (Increase) in account Receivable 34810-36710 -1900 Decrease in inventories 52990-50120 2870 Decrease in Prepaid Expenses 52990-50120 2870 Increase in Accounts Payable 47970-44560 3410 (Decrease) in WagesPayable 26210-29110 -2900 Cash generated from operations 153,450.00 Net cash from operating activities 153,450.00 Ans il Basically cash flows show the inflow and outflow of the cash not on the baseis of expenses accured or revenue earned. It does not take into account non cash activity like depreciation, amortization Now net Income tells the income earned due to business activity of the entity. It includes all the expenses which relate to certain period whether paid or payable and includes all the revenue which is earned wheather received or not. It also includes non opearting gains and losses which is a part og cash flow from investing and other activities So cash flow and net income is different Cash from Opeartions=EBIT+Depreciation-Taxes paid-Interest Paid Note: I have assumed that Interest paid is a part of opearting activity not financing activity Now as per the question if we add Depreciation to net income w Cash flows from operating activities Net Income 128,000.00 Adjustments for: Add: Depreciation 21100 Before working capital changes this is the cash flow from opearting activities 149,100.00 Ans iii Cash flow statement tells about how much is the cash inflows and outflows of the entity and how these are related with income from opearting activities, financing activities and investing activities. This position tells how much liquid and solvent the entity is and it helps to evaluate the future period cash flows and how much the company can pay dividends and what is the entity finance growth Net Income+Depreciation+Loss from investing/financing activity-Gain from investing/financing activities -Taxes Paid-Interest Paid-Increse in Current assets+Decrease in Current assets+Increase in Current Liabilities-Decrease in Current Liabilities This gives cash flow from opeartions Tsh flow statement from operating activities show that the entity has performed well and is able to earn well theer is no major changes in the net effect of working capital changes Ans iv cash Inflow and outflow (Increase) in account Receivable 34810-36710 -1900 Decrease in inventories 52990-50120 2870 Decrease in Prepaid Expenses 52990-50120 2870 Increase in Accounts Payable 47970-44560 3410 (Decrease) in WagesPayable 26210-29110 -2900 Net effect 4350 There is positive change in working capital as it is $4350 which tells that the company is able to genearte more cash than spending on payment to accopunts payable etc. And oveall net cash flow is %=$153450 which tells the company has surplus fund to finance the other two activities