Problem: The owner of a small business has asked you to prepare a statement that will show him where his firm’s cash came from and how it was used this year. He gives you the following information based on the Cash account in his general ledger.
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Balance at beginning of year
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$3,450
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Collection of accounts receivable
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$34,500
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Interest on savings account
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$345
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Sale of old machine
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$3,105
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Cash sales
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$27,600
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Total
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$69,000
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Payment on vendor accounts
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$17,250
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Cash purchase of supplies
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$345
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Cash purchase of inventory
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$17,250
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Down payment on new truck
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$3,450
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Rent payments
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$8,625
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Utilities
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$2,070
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Interest payment
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$1,035
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Other miscellaneous expenses
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$1,725
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Payment on debt
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$3,450
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Part-time help
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$6,900
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$62,100
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Balance at end of year
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$6,900
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In addition, the following is available from company records:
1. Sales were $61,410 for the year.
2. The Accounts Receivable balance decreased by $690.
3. Cash operating expenses totaled $54,165 (including cost of sales, supplies, rent, utilities, part-time help, and other miscellaneous expenses.
4. Accounts Payable decreased by a net of $2,760 during the year.
5. The Inventory balance remained constant throughout the year.
6. Deprecation of $1,725 was taken this year.
Required:
Prepare a cash flow statement using the direct method.