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The cash flow data of Palomba Pizza Stores for the year ended December 31, 2001, are as follows:

Cash payment of dividends $ 35,000
Purchase of land 14,000
Cash payments for interest 10,000
Cash payments for salaries 45,000
Sale of equipment 38,000
Retirement of common stock 25,000
Purchase of equipment 30,000
Cash payments to suppliers 85,000
Cash collections from customers 250,000
Cash at beginning of year 50,000
a. Prepare a statement of cash flows for Palomba showing:

Net cash provided by operating activities.
Net cash provided by or used in investing activities.
Net cash provided by or used in financing activities.
b. Discuss, from an analyst's viewpoint, the purpose of classifying cash flows into the three categories listed above.

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b. Discuss, from an analyst's viewpoint, the purpose of classifying cash flows into the three categories listed above.

Financial Statements is prepared to assist the stakeholders like investors, lenders, management etc so that they can assess the performance of the organization. . Cash flow statement is one of the important financial statements. It provides information regarding cash inflows and ...

Solution Summary

The purpose of classifying cash flows into the three categories is embedded.

$2.19
Similar Posting

Tovar Corporation: Cash Flow Statement

Please note that values are different here than on the attachment problem 14-4B.

Prepare the net cash provided by operating activities section of the company's statement of cash
flows for the year ended December 31, 2008, using the indirect method.

The three accounts shown below appear in the general ledger of Tovar Corp.during 2008.

Equipment
Date Debit Credit Balance
Jan. 1 Balance 160,000
July 31 Purchase of equipment 70,000 230,000
Sept. 2 Cost of equipment constructed 53,000 283,000
Nov. 10 Cost of equipment sold 49,000 234,000

Accumulated Depreciation?Equipment
Date Debit Credit Balance
Jan. 1 Balance 71,000
Nov. 10 Accumulated depreciation on
equipment sold 30,000 41,000
Dec. 31 Depreciation for year 28,000 69,000
Prepare partial statement of
cash flows?indirect method.

Retained Earnings
Date Debit Credit Balance
Jan. 1 Balance 105,000
Aug. 23 Dividends (cash) 14,000 91,000
Dec. 31 Net income 67,000 158,000

Instructions
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method.The loss on sale of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.)

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