Chapter 13 Solution

GSB 9004 Semester 2, 2012

Chapter 7

7.16 Three sisters formed a partnership to sell skin care products made from organic ingredients. They have been operating for one year. The bank balance at the end of the year is $41 000. A summary of business transactions is as follows:

Sales to customers 256 000

Receipts from customers 199 000

Payments for inventory 103 000

Payments for electricity, telephone, rent and insurance 5 000

Purchase of a motor vehicle 30 000

Drawings 50 000

Payment of interest 8 000

Loan proceeds 20 000

Interest received 1 000

Income taxes paid 3 000

Equity Injection 20 000

Required

Prepare a statement of cash flows.

Statement of Cash Flows

Cash flows from operating activities

Receipts from customers 199 000 

Payments to suppliers and employees (108 000)

Interest received 1 000

Interest paid (8 000)

Income taxes paid (3 000)

Net cash provided from operating activities 81 000 

Cash from Investing Activities

Payments for property, plant and equipment (30 000)

Proceeds from sale of property, plant and equipment -----

Net cash from Investing Activities (30 000)

Cash from financing activities

Proceeds from equity 20 000

Proceeds from borrowings 20 000 

Repayment of borrowings — 

Distributions Paid (50 000)

Net cash flow from financing activities (10 000)

Net increase/decrease in cash for the year 41 000 

Cash at beginning of the financial year 0 

Cash at the end of the financial year 41 000 

7.20 The cash flows below were extracted from the accounts of Miss Mary Mac, a music shop owner.

$

Repayment of Loan 50,000

Sale of property 50,000

Interest received 2,000

Payments to employees 100,000

Receipts from customers 350,000

Expenses paid 30,000

Computer equipment purchase 30,000

Interest paid 1,000

Payments to suppliers 200,000

Income taxes paid 4,000

Beginning cash balance 10,000...