Share
Explore BrainMass

# Statement of Cash Flows

I am having problems with the numbers adding up correctly. Please see attached. Thanks,

ABC Inc., rents equipment to customers ranging from
homeowners to large construction companies. The financial information
shown below was gathered from its accounting records for 2006. Assume
any increase or decrease in the balances from 1/1/06 to 12/31/06 resulted
from either receiving or paying cash in the transaction. For example, during
2006 the balance on loans for land holdings increased \$150,000 because the
company received \$150,000 in cash by taking out an additional loan on the
land.
Balance as of Balance as of
Items 1/1/06 12/31/06
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$ 20,000 \$ 50,000
Cash receipts from customers . . . . . . . . . . ? 600,000
Loans on land holdings . . . . . . . . . . . . . . 100,000 250,000
Cash distributions to owners . . . . . . . . . . . .? 150,000
Loan on building . . . . . . . . . . . . . . . . . . . .100,000 70,000
Investments in securities . . . . . . . . . . . . . 850,000 1,050,000
Cash payments for other expenses . . . . . . .? 50,000
Cash payments for taxes . . . . . . . . . . . . . . .? 55,000
Cash payments for operating expenses . . . ? 135,000
Cash payments for wages and salaries . . . ? 100,000

a. Prepare a statement of cash flows for ABC Inc., for the year ended December 31, 2006.
b. Does ABC Inc., appear to be in good shape from a
cash flow standpoint? What other information would help you analyze the situation?

#### Solution Preview

ABC Inc., rents equipment to customers ranging from
homeowners to large construction companies. The financial information
shown below was gathered from its accounting records for 2006. Assume
any increase or decrease in the balances from 1/1/06 to 12/31/06 resulted
from either receiving or paying cash in the transaction. For example, during
2006 the balance on loans for land holdings increased \$150,000 because the
company received \$150,000 in cash by taking out an additional loan on the
land.
Balance as of Balance as of
Items 1/1/06 12/31/06
Cash . . . . . . . . . . . . . . . . . . . . ...

#### Solution Summary

The solution explains how to prepare a statement of cash flows and use it to evaluate the financial condition of the firm.

\$2.19