Prepare an Horizontal statement Worksheet, and a cash flow statement, for the Sb
ID: 2568496 • Letter: P
Question
Prepare an Horizontal statement Worksheet, and a cash flow statement, for the Sbiru Corp, with the following events; In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and net change in cash (NC). Use NA to indicate that an element is not affected by the event:
January 1 – started the business by contributing $100,000 of personal capital in exchange for common stock
January 1 – Paid $5,000 to the lawyers to incorporate your business entity
January 2 – Acquired computers for the business for $5,000
January 3 – Acquired inventory held for re-sale for $20,000
January 4 – First sale took place, as you sold half of the inventory originally purchased. You sold it for $50,000 cash
February 1 – hired your first employee, and paid $5,000 cash for wages. You paid the same amount of wages on the first of each month for the remainder of the year.
February 15 – Sold the rest of the inventory for $75,000 cash
March 15 – got sued by an outside party, and got an invoice from lawyers for $2,000 for legal work performed, due in April
April 1 – Paid the legal invoice due
April 25 – Bought more inventory from your supplier, for $20,000 on credit
May 1 – Borrowed $100,000 from the bank, at an annual rate of 10%, due on December 31.
May 31 – Sold all remaining inventory for $50,000, on credit.
June 30 – Collected on all outstanding Accounts Receivable.
July 15 – Sold all of the computers for $1,000 in cash.
September 1 – bought more inventory, for $30,000 using long-term note payable.
October 1 – sold inventory – all that you had on hand, for $50,000 on credit.
November 1 – collected on accounts receivable, in all cash.
December 31 – made interest payment on the note
December 31 – paid $5,000 bonus in cash to employee.
December 31 – after books were closed, you paid 50% of all the remaining profit as cash dividend.
Explanation / Answer
Answer
Transaction on Date
Activity it pertains to
Reason(s) (if any)
Jan1
Financing Activity
Business gets capital of $100000
Jan 1
Operating activity
Business expense charged to Income Statement
Jan 2
Investing Activity
Amount invested in capital assets
Jan 3
Operating activity
Purchase-Sale is an operating activity
Jan 4
Operating activity
Net Income will increase
Feb 1
Operating activity
Expenses charged to income Statement
Feb 15
Operating activity
Net Income will increase
Mar 15
Operating activity
Expenses charged to Income Statement, and liability will is recorded as ‘due’
Apr 1
Operating activity
Liability paid off
Apr 25
Operating activity
Purchases made and liability recorded
May 1
Financing Activity
Business gets fund of $100000
May 31
Operating activity
Sale of all merchandise
June 30
Operating activity
Cash collected from receivables
Jul 15
Investing activity and Operating activity
Capital assets sold (investing), and Loss on sale of assets
Sep 1
Operating activity and Financing activity
Purchases made and loan taken(Financing)
Oct 1
Operating activity
Sales made and receivables recorded
Nov 1
Operating activity
Collected cash from receivables
Dec 31
Financing activity
Interest on borrowed funds
Dec 31
Operating activity
Expenses charged to income statement
Dec 31
Financing Activity
Dividend distributed
NOTE: The figures coming under ‘Retained Earnings’ column is coming from ‘Net Income’ column for that transaction (except for cash dividends on 31 Dec)
ASSETS (A)
Equity (B)
Liabilities (C )
Income Statement working
Date
Cash
Fixed Assets
Accounts receivables
Common Stock
Retained earnings
Accounts Payables
Notes payable
Revenue
Expense
Net Income
Jan-01
100000
100000
0
0
Jan-01
-5000
-5000
5000
-5000
Jan-02
-5000
5000
Jan-03
-20000
-20000
20000
-20000
Jan-04
50000
50000
50000
50000
Feb-01
-5000
-5000
5000
-5000
Feb-15
75000
75000
75000
75000
Mar-15
-2000
2000
2000
-2000
Apr-01
-2000
0
-2000
0
Apr-25
-20000
20000
20000
-20000
May-01
100000
0
100000
0
May-31
50000
50000
50000
50000
Jun-30
50000
-50000
0
0
Jul-15
1000
-5000
-4000
4000
-4000
Sep-01
-30000
30000
30000
-30000
Oct-01
50000
50000
50000
50000
Nov-01
50000
-50000
0
0
Dec-31
-6667
-6667
6667
-6667
Dec-31
-5000
-5000
5000
-5000
Wages for other months---
Mar-01
-5000
-5000
5000
-5000
Apr-01
-5000
-5000
5000
-5000
May-01
-5000
-5000
5000
-5000
Jun-01
-5000
-5000
5000
-5000
Jul-01
-5000
-5000
5000
-5000
Aug-01
-5000
-5000
5000
-5000
Sep-01
-5000
-5000
5000
-5000
Oct-01
-5000
-5000
5000
-5000
Nov-01
-5000
-5000
5000
-5000
Dec-01
-5000
-5000
5000
-5000
(Dividend) Dec-31
-38667
-38667
0
Ending balance
288666
0
0
100000
38666
20000
130000
225000
147667
77333
A. Cash Flow from Operating Activities
Net Income (as the balance coming at the end in workings)
77333
Add: Adjusted for
Jul-15
Loss on Sale
4000
Adjusted Net Income
81333
Add:
Decrease in Accounts receivables
Jun-30
50000
Nov-01
50000
Increase in Accounts payable
Mar-15
2000
Apr-25
20000
Less:
Increase in Accounts receivables
May-31
50000
Oct-01
50000
Decrease in Accounts payables
Apr-01
2000
Net cash flows from Operating Activities
101333
B. Cash flow from Investing Activities
Assets purchased
Jan-02
-5000
Assets sold
Jul-15
1000
Net cash flows from Investing activities
-4000
C. Cash flow from Financing Activities
Common Stock issued
100000
Notes payable
May-01
100000
Sep-01
30000
Dividend
50% Dec 31
-38667
Net cash flows from Financing Activities
191333
Net Increase (Decrease) in Cash (A+B+C)
288666
Add: Cash at the beginning
0
Cash at the end (matches with closing balance)
288666
Transaction on Date
Activity it pertains to
Reason(s) (if any)
Jan1
Financing Activity
Business gets capital of $100000
Jan 1
Operating activity
Business expense charged to Income Statement
Jan 2
Investing Activity
Amount invested in capital assets
Jan 3
Operating activity
Purchase-Sale is an operating activity
Jan 4
Operating activity
Net Income will increase
Feb 1
Operating activity
Expenses charged to income Statement
Feb 15
Operating activity
Net Income will increase
Mar 15
Operating activity
Expenses charged to Income Statement, and liability will is recorded as ‘due’
Apr 1
Operating activity
Liability paid off
Apr 25
Operating activity
Purchases made and liability recorded
May 1
Financing Activity
Business gets fund of $100000
May 31
Operating activity
Sale of all merchandise
June 30
Operating activity
Cash collected from receivables
Jul 15
Investing activity and Operating activity
Capital assets sold (investing), and Loss on sale of assets
Sep 1
Operating activity and Financing activity
Purchases made and loan taken(Financing)
Oct 1
Operating activity
Sales made and receivables recorded
Nov 1
Operating activity
Collected cash from receivables
Dec 31
Financing activity
Interest on borrowed funds
Dec 31
Operating activity
Expenses charged to income statement
Dec 31
Financing Activity
Dividend distributed