Summary: Statement Of Cash Flows
Week 5-Check Point-Preparing a Statement of Cash Flows
Anderson, C.
Axia College of University of Phoenix
Due: August 7, 2011
ACC/230
Nathan McDaniel
In this paper I will show the Balance Sheet and Income Statement for Little Bit, Inc., and then I will draw up a Statement of Cash Flows for Little Bit, Inc., then I will give you an analysis of the Statement of Cash Flows that I have drawn up. Balance Sheet for 2009
December 31,
2009 2008
Cash $ 40,000 $ 24,000
Accounts receivable (net) 48,000 41,500
Inventory 43,000 34,500
Prepaid expenses 19,000 15,000
Total Current Assets $ 150,000 $ 115,000
Plant and equipment $ 67,000 $ 61,000
Less accumulated depreciation (41,000) (23,000)
Plant and equipment (net) $ 26,000 $ 38,000 …show more content…
Long-term investments 90,000 89,000
Total Assets $ 266,000 $ 242,000
Accounts payable $ 13,000 $ 11,000
Accrued liabilities 55,000 71,000
Total Current Liabilities $ 68,000 $ 82,000
Long-term debt 25,000 8,000
Deferred taxes 4,000 3,500
Total Liabilities $ 97,000 $ 93,500
Common stock ($1 par) and additional paid-in capital 112,000 97,000
Retained earnings 57,000 51,500
Total Liabilities and Equity $ 266,000 $ 242,000
Income Statement for 2009
Sales $155,000
Cost of goods sold 83,000
Gross profit $ 72,000
Selling and administrative $45,700
Depreciation 18,000 63,700
Operating Profit $ 8,300
Interest expense 2,000
Earnings before tax $ 6,300
Tax expense 800
Net income $ 5,500
Statement of Cash Flows
Little Bit, Inc.
Statement of Cash Flows For Year Ended December 31, 2009
Cash flow from operating activities
Net income $5,500
Non-cash expenses included in net income:
Depreciation 18,000
Deferred income taxes 500 Cash provided by (used for) current assets and liabilities
Accounts receivable (6,500)
Inventory (8,500)
Prepaid expenses (4,000)
Accounts payable 2,000
Accrued liabilities (16,000) Net cash used by operating activities ($9,000)
Cash flows from investing activities
Purchase of plant and equipment (6,000)
Purchase of long-term investments (1,000)
Net cash used by investing activities ($7,000) Cash flows from financing activities
Additions to long-term debt 17,000
Sales of common stock 15,000 Net cash provided by financing activities $32,000 The Increase in Cash: $16,000
My analysis: Inflows $ %
Long-term debt 17,000 53
Sales of common stock 15,000 47
Totals 32,000 100
Outflows
Operating activities 9,000 56
Purchase of property and equipment 6,000 38
Purchase of long-term investments 1,000 6
Totals 16,000
100
Little Bit, Inc. failed to generate cash from operating activities due primarily to the growth in inventories, receivables, and prepaid expenses, combined with the payment of accrued liabilities. This firm may be expanding as evidenced by the increase in capital assets. The expansion is being supported primarily by long-term debt only for the acquisition of plant and equipment, but also to cover the negative cash flows from operations. This is generally not good to match long-term debt maturities with the financing of current assets. It is essential that Little Bit, Inc. generate their cash flow in the future in order to lessen the need for debt, perhaps by controlling the growth of inventories and receivables.
Anderson, C.
Axia College of University of Phoenix
Due: August 7, 2011
ACC/230
Nathan McDaniel
In this paper I will show the Balance Sheet and Income Statement for Little Bit, Inc., and then I will draw up a Statement of Cash Flows for Little Bit, Inc., then I will give you an analysis of the Statement of Cash Flows that I have drawn up. Balance Sheet for 2009
December 31,
2009 2008
Cash $ 40,000 $ 24,000
Accounts receivable (net) 48,000 41,500
Inventory 43,000 34,500
Prepaid expenses 19,000 15,000
Total Current Assets $ 150,000 $ 115,000
Plant and equipment $ 67,000 $ 61,000
Less accumulated depreciation (41,000) (23,000)
Plant and equipment (net) $ 26,000 $ 38,000 …show more content…
Long-term investments 90,000 89,000
Total Assets $ 266,000 $ 242,000
Accounts payable $ 13,000 $ 11,000
Accrued liabilities 55,000 71,000
Total Current Liabilities $ 68,000 $ 82,000
Long-term debt 25,000 8,000
Deferred taxes 4,000 3,500
Total Liabilities $ 97,000 $ 93,500
Common stock ($1 par) and additional paid-in capital 112,000 97,000
Retained earnings 57,000 51,500
Total Liabilities and Equity $ 266,000 $ 242,000
Income Statement for 2009
Sales $155,000
Cost of goods sold 83,000
Gross profit $ 72,000
Selling and administrative $45,700
Depreciation 18,000 63,700
Operating Profit $ 8,300
Interest expense 2,000
Earnings before tax $ 6,300
Tax expense 800
Net income $ 5,500
Statement of Cash Flows
Little Bit, Inc.
Statement of Cash Flows For Year Ended December 31, 2009
Cash flow from operating activities
Net income $5,500
Non-cash expenses included in net income:
Depreciation 18,000
Deferred income taxes 500 Cash provided by (used for) current assets and liabilities
Accounts receivable (6,500)
Inventory (8,500)
Prepaid expenses (4,000)
Accounts payable 2,000
Accrued liabilities (16,000) Net cash used by operating activities ($9,000)
Cash flows from investing activities
Purchase of plant and equipment (6,000)
Purchase of long-term investments (1,000)
Net cash used by investing activities ($7,000) Cash flows from financing activities
Additions to long-term debt 17,000
Sales of common stock 15,000 Net cash provided by financing activities $32,000 The Increase in Cash: $16,000
My analysis: Inflows $ %
Long-term debt 17,000 53
Sales of common stock 15,000 47
Totals 32,000 100
Outflows
Operating activities 9,000 56
Purchase of property and equipment 6,000 38
Purchase of long-term investments 1,000 6
Totals 16,000
100
Little Bit, Inc. failed to generate cash from operating activities due primarily to the growth in inventories, receivables, and prepaid expenses, combined with the payment of accrued liabilities. This firm may be expanding as evidenced by the increase in capital assets. The expansion is being supported primarily by long-term debt only for the acquisition of plant and equipment, but also to cover the negative cash flows from operations. This is generally not good to match long-term debt maturities with the financing of current assets. It is essential that Little Bit, Inc. generate their cash flow in the future in order to lessen the need for debt, perhaps by controlling the growth of inventories and receivables.