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