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# Calculating change in cash and statement of cash flows

See the attachment.

(a) Calculate the change that occurred in cash during the month. You may assume that the change in each balance sheet amount is due to a single event (for example, the change in the amount of production equipment is not the result of both a purchase and sale of equipment). (Hints: What is the purpose of the statement of cash flows? How is this purpose accomplished?) Because the retained earnings section of the balance sheet is, in and of itself, an analysis of the change in the retained earnings account for the month, the row for net income and dividends should be entered as the February amount and not the change. Use the space to the right of the January 31 data to enter the difference between the February 28 and January 31 amounts of each balance sheet item. (Negative amount should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.Omit the "\$" sign in your response.)

(b) Prepare a statement of cash flows that explains above changes? (Negative amount should be indicated by a minus sign.Omit the "\$" sign in your response.)

#### Solution Summary

This solution illustrates how to compute the change in account balances between balance sheets and how to use this information to complete a statement of cash flows.

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