CC17 COOKIE CREATIONS
(a) Indirect method
COOKIE & COFFEE CREATIONS INC.
Cash Flow Statement
Year Ended October 31, 2018
Operating activities
Net income ………………………………………………………. $74,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation expense …………………………………… $ 9,850
Increase in accounts receivable ……………………. (3,250)
Increase in inventory ……………………………………. (17,897)
Net cash provided by operating activities ….. 83,189
Investing activities
Purchase of equipment (Note X) ……………………… (87,700)
Net cash used by investing activities ………… (87,700)
Financing activities
Issue of preferred stock ……………………………….. $ 14,000
Issue of common stock ………………………………… 25,930
Net increase in cash …………………………………………….. 32,219
Cash, November 1, 2017 ……………………………………….. 0
Cash, October 31, 2018 ………………………………………… $32,219
CC17 (Continued)
(b) Direct method
COOKIE & COFFEE CREATIONS INC.
Cash Flow Statement
Year Ended October 31, 2018
Operating activities
Cash receipts from customers (1) ……………. $459,250
Cash payments
To suppliers (2) …………………………………………… $(243,299)
Investing activities
Purchase of equipment (Note X) ………………………. (87,700)
Net cash used by investing activities ……………. (87,700)
Financing activities
Issue of common stock …………………………………… $ 25,930
Issue of preferred stock …………………………………… 14,000
Principal repayment of note payable ………………… (2,000)
Repurchase of stock ……………………………………….. (500)
CC17 (Continued)
(b) (Continued)
Note X: During the year, the company acquired kitchen equipment with a cost
of $17,000 by paying $5,000 cash and incurring a $12,000 note payable.
Calculations:
(1) Cash receipts from customers
(2) Cash payments to suppliers
Cost of goods sold ………………………………. $231,250
Add: Increase in inventory …………………… 17,897
(3) Cash payments for operating expenses
Operating expenses ……………………………… $ 35,987
(4) Cash payments to employees
Salaries and wages expense …………………. $ 92,500
CC17 (Continued)
(b) (Continued)
(5) Cash payments for interest
(6) Cash payments for income tax
Income tax expense ………………………. $18,500
Increase in income tax payable …………….. (18,500)
Cash payments for income tax ……………… $ 0
(7) Cash payments for dividends