Financial Accounting: An Integrated Statements Approach, 2nd Edition

176 Chapter 4 Accounting Information Systems

Exhibit 17

Statement of Cash

Flows for Online

Solutions

Online Solutions

Statement of Cash Flows

For the Two Months Ended December 31, 2007

Cash flows from operating activities:

Cash received from customers $ 14,120 (a)

Cash received from renting land 360 $14,480

Deduct cash payments for expenses 11,615 (b)

Net cash flows from operating activities $ 2,865

Cash flows used for investing activities:

Purchase of land $(20,000)

Purchase of office equipment (1,800)

Net cash flows used in investing activities (21,800)

Cash flows from financing activities:

Issuance of capital stock $ 25,000

Payment of dividends (4,000)

Net cash flows from financing activities 21,000

Net increase in cash $ 2,065

November 1, 2007, cash balance 0

December 31, 2007, cash balance $ 2,065

Computational Notes:

(a) $14,120$7,500$3,100$650$2,870

(b) Wages ($2,125$950$1,200) $ 4,275

Insurance 2,400

Supplies ($950$400$550) 1,900

Rent ($800$800) 1,600

Utilities ($450$310$225) 985

Miscellaneous ($275$180) 455

Total cash payments for expenses $11,615

Exhibit 18

Reconciliation of Net

Income with Net Cash

Flows from Operating

Activities

Online Solutions

Reconciliation of Net Income

with Net Cash Flows from Operating Activities

For the Two Months Ended December 31, 2007

Net income $7,205

Add:

Depreciation expense $ 50

Increase in accounts payable 900

Increase in wages payable 250

Increase in unearned rent 240 1,440

Deduct:

Increase in accounts receivable $(2,720)

Increase in supplies (760)

Increase in prepaid insurance (2,300) (5,780)

Net cash flows from operating activities $2,865