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Solution FM 211 Quiz CFS

The bakery had $189,000 in sales and $19,900 in net income. However, cash flow from operating activities was only $26,800 due to increases in accounts receivable and inventory, and decreases in accounts payable. For the corporation, while it had $88,000 in net income, cash did not improve because accounts receivable increased by $17,500, prepaid expenses decreased by $1,200, and accounts payable decreased by $22,000, resulting in only $49,700 in cash flow from operating activities.

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166 views2 pages

Solution FM 211 Quiz CFS

The bakery had $189,000 in sales and $19,900 in net income. However, cash flow from operating activities was only $26,800 due to increases in accounts receivable and inventory, and decreases in accounts payable. For the corporation, while it had $88,000 in net income, cash did not improve because accounts receivable increased by $17,500, prepaid expenses decreased by $1,200, and accounts payable decreased by $22,000, resulting in only $49,700 in cash flow from operating activities.

Uploaded by

EDLYN MABUTI
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Quiz:

FM 211
September 28, 2021

PROBLEM NO. 1 Assume you're the owner of a specialized bakery that specializes
in gourmet cupcakes. The financial statements of your company are shown below:

Income statement Balance Sheet


Sales $189,000
Cost of Goods Sold (75,600)
Operating Expense (except Depreciation) (81,500)
Depreciation Expense (12,000)
Net Income $ 19,900

Account Receivable decrease $2,000
Merchandise Inventory Increase accounts 1,600
Payable decrease 5,500

Solution
Net Income $19,900
Depreciation 12,000
Accounts receivable decrease 2,000
(Merchandise Inventory increase (1,600)
Payable decrease (5,550)
Cash flow from operating activities 26 800
======


PROBLEM NO. 2 Take a look at the information below. Even though the corporation
had a strong profit for the year, with a net income of $88,000, you are asked to explain
to the management why the cash balance did not improve from the beginning of 2020
to the end of 2020. It was supposed that the company didn't do any investing or
funding. How do you feel about it? Give a calculation to back up your answer.



December 31, 2020 December 31,
2019
Cash $ 195,700 $ 146,000
Accounts Receivable 216,000 198,500
Prepaid Expense (Insurance and office Rent) 6,000 7,200
Accounts payable 80,500 102,500




Solution:

Operating Activities ……………………………………………………………… $88,000
Net Income
Increase in Accounts receivable (198,500 -216,000) …………… (17,500)
Decrease in Prepaid Expenses ( 7,200 – 6,000) ……………………… 1,200
Decrease in Accounts payable 102,500- 80,500) ……………………. (22,000)
Net Cash Flow from Operating activities $49,700
` ========

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