Lion, Inc. Cash Flows Case Study
Essay by Amgaa • April 13, 2018 • Case Study • 902 Words (4 Pages) • 1,022 Views
- Lion, Inc. has the following cash transactions for the period:
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Prepare a direct statement of cash flows, assuming the balance of cash at the beginning of the period was $4,000.
Statement of Cash Flows (Direct) | |||
Beginning cash | 4000 | ||
Cash from Operations | |||
Cash received from the sale of products to customers | 35000 | ||
Cash paid to merchandise supplier | (11000) | ||
Cash paid to workers | (23000) | ||
Cash paid for advertisement | (3000) | ||
Cash received for sale of services to customers | 25000 | ||
Total cash from operations | 23000 | ||
Cash from Investing | |||
Cash paid to purchase factory equipment | (45000) | ||
Cash received from the sale of an unused warehouse | 12000 | ||
Total cash from investing | (33000) | ||
Cash from Financing | |||
Cash received from the bank for long-term loans | 40000 | ||
Cash paid for dividends to stockholders | (5000) | ||
Total cash from financing | 35000 | ||
Change in cash | 25000 | ||
Ending cash | 29000 |
- During its first five years of operations, Jalen, Inc. reports net income and pays dividends as follows.
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Calculate the balance of retained earnings at the end of each year.
Year | Net income | Dividends | Retained Earnings |
1 | $ 1,200 | $ 500 | $ 700 |
2 | 1,700 | $ 500 | $ 1900 |
3 | 2,100 | 1,000 | $ 3000 |
4 | 3,200 | 1,000 | $ 5200 |
5 | 4,400 | 1,000 | $ 8600 |
Retained earnings = Beginning Retained earnings + Net income – Dividends
Retained earnings (1) = 0 + 1200 – 500 = $700
Retained earnings (2) = 700 + 1700 – 500 = $1900
Retained earnings (3) = 1900 + 2100 – 1000 = $3000
Retained earnings (4) = 3000 + 3200 – 1000 = $5200
Retained earnings (5) = 5200 + 4400 – 1000 = $8600
- Consider the following unrelated scenarios:
- Leon reports an increase in retained earnings of $2.2 billion and net income of $4.9 billion. What was the amount of dividends paid?
Dividends = Beginning Retained earnings + Net income – Retained earnings.
Dividends = 0 + $4.9 billion – $2.2 billion = $2.7 billion
- Moore reports an increase in retained earnings of $2.4 billion and dividends of $1.6 billion. What was the amount of net income?
Net income = Dividends + Retained earnings - Beginning Retained earnings.
Net income = $1.6 billion + $2.4 billion – 0 = $4.0 billion
- Nandu reports and increase in retained earnings of $1.5 billion and net income of $1.5 billion. What was the amount of dividends paid?
Dividends = Beginning Retained earnings + Net income – Retained earnings.
Dividends = 0 + $1.5 billion – $1.5 billion = $ 0
- Ovid reports beginning retained earnings of $(1.8) billion, a net loss of $0.9 billion, and no dividends. What is the amount of ending retained earnings?
Retained earnings = Beginning Retained earnings + Net income – Dividends
Retained earnings = $(1.8) billion + $(0.9) billion + 0 = $(2.7) billion
- Pulse reports ending retained earnings of $1.36 billion, net income of $0.33 billion, and dividends of $0.05 billion. What is the amount of beginning retained earnings?
Beginning Retained earnings = Retained earnings (end) - Net income + Dividends.
Beginning Retained earnings = $1.36 billion - $0.33 billion + $0.05 = $1.08 billion
- Consider the following unrelated scenarios related to cash flows:
- Quartz reports operating cash flows of $3.5 billion, investing cash flows of $0.5 billion, and financing cash flows of $(4.0) billion. What was the amount of total change in cash?
Beginning cash | 0 | |
Operating cash flows | $3.5 billion | |
Investing cash flows | $0.5 billion | |
Financing cash flows | $(4.0) billion | |
Change in cash | 0 |
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