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Sample Problem

Sample Problem. Problem 25.1A. A comparative balance sheet for LEH Inc., on December 31, 2008 and 2007, follows. Additional information about the firm’s financial activities during 2008 is given below. Prepare a statement of cash flows for 2008. Additional information for 2008 follows.

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Sample Problem

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Presentation Transcript

  1. Sample Problem Problem 25.1A

  2. A comparative balance sheet for LEH Inc., on December 31, 2008 and 2007, follows. Additional information about the firm’s financial activities during 2008 is given below. • Prepare a statement of cash flows for 2008. Additional information for 2008 follows. • Had a $20,000 net income. • Recorded $6,300 in depreciation. • Issued bonds payable with a par value of $30,000 at par and received cash. • Received $15,000 in cash for the issue of an additional 15,000 shares of $1 par value common stock. • Purchased equipment for $30,000 in cash.

  3. LEH, INC.Statement of Cash FlowsYear Ended December 31, 2008 Cash Flows from Operating Activities Net Income 20,000 Adjustments: Depreciation 6,300 Increase in A/R (6,400) Increase in merchandise inv. (2,600) Decrease in A/P (17,993) Total adjustments (20,693) Net cash provided by operating activities (693)

  4. Statement of cash flows continued …. Net cash used in investing activities Purchase of equipment (30,000) Net cash used in investing activities (30,000)

  5. Statement of cash flows continued …. Cash Flows from Financing Activities Proceeds from issuance of bonds payable 30,000 Proceeds from issuance of common stock 15,000 Net cash provided from financing activities 45,000

  6. Statement of cash flows complete Cash Flows from Operating Activities Net Income 20,000 Adjustments: Depreciation 6,300 Increase in A/R (6,400) Increase in merchandise inv. (2,600) Decrease in A/P (17,993) Total adjustments (20,693) Net cash provided by operating activities (693) Net cash used in investing activities Purchase of equipment (30,000) Net cash used in investing activities (30,000) Cash Flows from Financing Activities Proceeds from issuance of bonds payable 30,000 Proceeds from issuance of common stock Net cash provided from financing activities 45,000 Net increase in cash 14,307 Cash, January 1, 2008 39,500 Cash, December 31, 2008 53,807 * *Note that the ending cash balance is the same as the cash balance for 2008 on the balance sheet.

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