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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 1-50 Statement of Cash Flows OBJECTIVE o

Walters Inc. began operations on January I. 2019. The following information relates to Walters’

cash flows during 2019.

Chapter 1, Problem 50E, Exercise 1-50 Statement of Cash Flows OBJECTIVE o Walters Inc. began operations on January I. 2019.

Required:

1. Calculate the cash provided/fused for each cash flow category.

2. CONCEPTUAL CONNECTION Comment on Walters’ creditworthiness.

To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

  • Operating Activities: Operating Activities are day to day business transactions, for example sales purchase etc.
  • Investing Activities: Investing Activities belong to the sale or purchase of assets or investments of a business. For example sales of fixed assets etc, purchase of investments.
  • Financing Activities: Financing Activities includes the transactions related to raising business finds through equity or debts. For example, issuance of shares and payment of dividend to shareholders.

Requirement-1:

To Calculate:

The Cash provide/used by each cash flow category.

Explanation

The Cash provide/used by each cash flow category is calculated as follows;

    Cash flows from operating activities:
    Cash Paid for Advertising $ (34,200)
    Cash received from customers $ 139,800
    Cash Paid to Employees $ (46,400)
    Cash Paid for Supplies $ (28,700)
    Cash provided by operating activities$ 30,500
    Cash Flows from investing activities:
To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

  • Operating Activities: Operating Activities are day to day business transactions, for example sales purchase etc.
  • Investing Activities: Investing Activities belong to the sale or purchase of assets or investments of a business. For example sales of fixed assets etc, purchase of investments.
  • Financing Activities: Financing Activities includes the transactions related to raising business finds through equity or debts. For example, issuance of shares and payment of dividend to shareholders.

Requirement-2:

The Credit worthiness of the company.

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