Question:

Cash flows continued from previously corrected post?

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Refer to the information reported about Kazaam Company in Problem 16-1A.

Required

Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 16A.1; report its operating

activities using the indirect method. Identify the debits and credits in the Analysis of Changes

columns with letters that correspond to the following list of transactions and events:

a. Net income is $73,750.

b. Accounts receivable increased.

c. Merchandise inventory increased.

d. Prepaid expenses decreased.

e. Accounts payable decreased.

f. Depreciation expense is $18,750.

g. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash.

This yielded a loss of $5,125.

h. Purchased equipment costing $96,375 by paying $25,000 cash and (i.) by signing a long-term

note payable for the balance.

j. Borrowed $3,750 cash by signing a short-term note payable.

k. Paid $31,375 cash to reduce the long-term notes payable.

l. Issued 2,500 shares of common stock for $18 cash per share.

m. Declared and paid cash dividends of $62,125.

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1 ANSWERS


  1. a. Net income is $73,750 (Debit)

    b. Accounts receivable increased (Credit)

    c. Merchandise inventory increased (Credit)

    d. Prepaid expenses decreased (Debit)

    e. Accounts payable decreased (Credit)

    f. Depreciation expense is $18,750 (Debit)

    g. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash (Debit)

    This yielded a loss of $5,125 (Debit)

    h. Purchased equipment costing $96,375 by paying $25,000 cash (Credit) and

    (i.) by signing a long-term note payable for the balance (shown in a note)

    j. Borrowed $3,750 cash by signing a short-term note payable (Debit)

    k. Paid $31,375 cash to reduce the long-term notes payable

    (Credit)

    l. Issued 2,500 shares of common stock for $18 cash per share (Debit)

    m. Declared and paid cash dividends of $62,125 (Credit)

    Pls also read notes attached.

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