Fin 200 Week 1 Assignment
Cash Flow Preparation
27) Cash Flow Preparation
CROSBY CORPORATION
Income Statement for the Year Ending December 31, 2008
Cash flows from operating activities:
Net income: $160.000
Adjustments to cash flow from operating activities
Depreciation (re-added) $150,000
Increase in inventory $20,000
Decrease in already paid expenses ($20,000)
Increase in accounts payable $210,000
Decrease in accrued expenses $20,000
Total adjustments $380,000
Net cash flow from operating activities $160,000
Cash flows from investing activities:
Increase in investments ($10,000)
Increase in plant and equipment $400,000
Net cash flow from investing $390,000
Cash flow from financing activities:
Increase in bonds payable $50,000
Preferred stock dividends paid $10,000
Common stock paid $120,000
Net cash flow from financing activities $180,000
Net increase in cash flow is $20,000
28.) The relationship between net income and net cash flows from operating activities for the company is that, the net income is the basic in which the company can use is a direct method. The items on the income statement are adjusted to cash accounting. The net income shows where it starts and the adjustments are made to change net income to cash flow from operations.
29.) The plant and equipment have been financed in a good way due to the way the company created excess funds from operating activities that they in turn utilized for the investing activities and in some areas of the financing activities. Due to the way that the company created the excess funds, there is a $20,000 increase in the cash flow balance; this can also be checked against the cash
27) Cash Flow Preparation
CROSBY CORPORATION
Income Statement for the Year Ending December 31, 2008
Cash flows from operating activities:
Net income: $160.000
Adjustments to cash flow from operating activities
Depreciation (re-added) $150,000
Increase in inventory $20,000
Decrease in already paid expenses ($20,000)
Increase in accounts payable $210,000
Decrease in accrued expenses $20,000
Total adjustments $380,000
Net cash flow from operating activities $160,000
Cash flows from investing activities:
Increase in investments ($10,000)
Increase in plant and equipment $400,000
Net cash flow from investing $390,000
Cash flow from financing activities:
Increase in bonds payable $50,000
Preferred stock dividends paid $10,000
Common stock paid $120,000
Net cash flow from financing activities $180,000
Net increase in cash flow is $20,000
28.) The relationship between net income and net cash flows from operating activities for the company is that, the net income is the basic in which the company can use is a direct method. The items on the income statement are adjusted to cash accounting. The net income shows where it starts and the adjustments are made to change net income to cash flow from operations.
29.) The plant and equipment have been financed in a good way due to the way the company created excess funds from operating activities that they in turn utilized for the investing activities and in some areas of the financing activities. Due to the way that the company created the excess funds, there is a $20,000 increase in the cash flow balance; this can also be checked against the cash