Part 2 – Statement of Cash Flows Tax Consultants Inc. began operations on January 1, 2019, when it issued 20,000 common shares for $20,000 cash. The company performed tax consulting services throughout its first two years. For 2020, the comparative statements of financial position, income statement, and additional information are presented below (including an analysis of the change in SFP accounts from 2019 to 2020). Comparative Balance Sheets (Statements of Financial Position) Dec. 31, Dec. 31, Change Increase/Decrease Assets 2020 2019 Cash $ 69,000 $10,000 (a) 49,000 increase Accounts receivable 46,000 10,000 (b) 36,000 increase Equipment (net) 40,000 50,000 (c) 10,000 decrease $155,000 $70,000 Liabilities and Shareholders' Equity Accounts payable $ 35,000 $30,000 (d) 5,000 increase Common shares 80,000 20,000 (e) 60,000 increase Retained earnings 40,000 20,000 (f) 20,000 increase $155,000 $70,000 Income Statement For the Year Ended December 31, 2020 Revenues $125,000 Operating expenses other than depreciation 75,000 Depreciation expense 10,000 Income before income taxes 40,000 Income tax expense 6,000 Net income $ 34,000 Note: Tax Consultants Inc. did not purchase of sell any equipment during 2020. Required: 1. Prepare a statement of cash flows using the direct approach for Tax Consultants Inc. for 2020. 2. Determine the cash collected from customers and dividends paid during 2020. 3. After completing the statement of cash flows, discuss the key factors that led to the cash increase or decrease by type of activity (operating, investing, and financing)
Part 2 – Statement of Cash Flows Tax Consultants Inc. began operations on January 1, 2019, when it issued 20,000 common shares for $20,000 cash. The company performed tax consulting services throughout its first two years. For 2020, the comparative statements of financial position, income statement, and additional information are presented below (including an analysis of the change in SFP accounts from 2019 to 2020). Comparative Balance Sheets (Statements of Financial Position) Dec. 31, Dec. 31, Change Increase/Decrease Assets 2020 2019 Cash $ 69,000 $10,000 (a) 49,000 increase Accounts receivable 46,000 10,000 (b) 36,000 increase Equipment (net) 40,000 50,000 (c) 10,000 decrease $155,000 $70,000 Liabilities and Shareholders' Equity Accounts payable $ 35,000 $30,000 (d) 5,000 increase Common shares 80,000 20,000 (e) 60,000 increase Retained earnings 40,000 20,000 (f) 20,000 increase $155,000 $70,000 Income Statement For the Year Ended December 31, 2020 Revenues $125,000 Operating expenses other than depreciation 75,000 Depreciation expense 10,000 Income before income taxes 40,000 Income tax expense 6,000 Net income $ 34,000 Note: Tax Consultants Inc. did not purchase of sell any equipment during 2020. Required: 1. Prepare a statement of cash flows using the direct approach for Tax Consultants Inc. for 2020. 2. Determine the cash collected from customers and dividends paid during 2020. 3. After completing the statement of cash flows, discuss the key factors that led to the cash increase or decrease by type of activity (operating, investing, and financing)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter3: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 19SP
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