Question

The following transactions pertain to the operations of Blair Company for 2014:

1. Acquired $23,400 cash from the issue of common stock.
2. Performed services for $43,000 cash.
3. Paid a $27,200 cash advance for a one-year contract to rent equipment.
4. Recognized $32,200 of accrued salary expense.
5. Accepted a $1,600 cash advance for services to be performed in the future.
6. Provided $16,900 of services on account.
7. Incurred $7,350 of other operating expenses on account.
8. Collected $5,400 cash from accounts receivable.
9. Paid a $9,000 cash dividend to the stockholders.
10. Paid $18,000 cash on accounts payable.

a. Classify the cash flows from these transactions as :

Operating activities (OA),
Investing activities (IA), or
Financing activities (FA).

Use NA for transactions that do not affect the statement of cash flows.

b. Prepare a Statement of Cash flows.
(There is no beginning cash balance.) (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

The items of cash flows are classified as follows:

1. Acquired $23,400 cash from the issue of common stock. (FA)

2. Performed services for $43,000 cash. (OA)

3. Paid a $27,200 cash advance for a one-year contract to rent equipment. (OA)

4. Recognized $32,200 of accrued salary expense. (NA)

5. Accepted a $1,600 cash advance for services to be performed in the future. (OA)

6. Provided $16,900 of services on account. (NA)

7. Incurred $7,350 of other operating expenses on account. (NA)

8. Collected $5,400 cash from accounts receivable. (OA)

9. Paid a $9,000 cash dividend to the stockholders. (FA)

10. Paid $18,000 cash on accounts payable.(OA)

b.The increase in cash and cash equivalents in the year is $19200 as shown below

Explanation:

Blair Company Statement of Cash Flows:

                                                                      $

Cash Sales                                                43000

Equipment rent                                          -27200

Service Advance Cash                                1600

Accounts receivable                                    5400

Accounts payable                                       -18000

Cash flows from operating activities           4800

Financing activities

Common stock                      23400

Dividends                                -9000

                                                                        14400

                                                                       19200