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Cornerstones of Financial Accounti...

4th Edition
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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Preparing a Prospective Statement of Cash Flows

Jane and Harvey Wentland have decided to open a retail athletic supply store, Fitness Outfitters Inc. They will stock clothing, shoes, and supplies used in running, swimming, bicycling, weight lifting, and other exercise and athletic activities. During their first year of operations, 2019, they expect the following results. (Subsequent years are expected to be more successful.)

Chapter 11, Problem 62.3C, Preparing a Prospective Statement of Cash Flows Jane and Harvey Wentland have decided to open a , example  1

By the end of 2019, Fitness Outfitters needs to have a cash balance of $5,000 and is expected to have the following partial balance sheet:

Chapter 11, Problem 62.3C, Preparing a Prospective Statement of Cash Flows Jane and Harvey Wentland have decided to open a , example  2

Assume that all sales will be for cash and that equipment will be acquired for cash.

Does the preparation of a prospective statement of cash flows seem worthwhile for an ongoing business? Why?

To determine

Concept introduction:

Cash flow statement also known as statement of cash flows shows inflow and outflow of cash and it is divided into three categories- operating, investing and financing activities.

Whether it is worthwhile to prepare prospective statement of cash flow for an ongoing business.

Explanation

The prospective statement of cash flows is as much important as other financial statements as it provides the image of business in terms of actual cash receipts and payments.This helps the business in knowing and determining the actual cash flow position in the business apart from net income, as there can be a scenario where the business is earning good profits...

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