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Financial & Managerial Accounting
Found in: Page 39
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations.

May 1 G. Gram invested $40,000 cash in the company in exchange for its common stock.

1 The company rented a furnished office and paid $2,200 cash for May’s rent.

3 The company purchased $1,890 of office equipment on credit.

5 The company paid $750 cash for this month’s cleaning services.

8 The company provided consulting services for a client and immediately collected $5,400 cash.

12 The company provided $2,500 of consulting services for a client on credit.

15 The company paid $750 cash for an assistant’s salary for the first half of this month.

20 The company received $2,500 cash payment for the services provided on May 12.

22 The company provided $3,200 of consulting services on credit.

25 The company received $3,200 cash payment for the services provided on May 22.

26 The company paid $1,890 cash for the office equipment purchased on May 3.

27 The company purchased $80 of advertising in this month’s (May) local paper on credit; cash payment is due June 1.

28 The company paid $750 cash for an assistant’s salary for the second half of this month.

30 The company paid $300 cash for this month’s telephone bill.

30 The company paid $280 cash for this month’s utilities.

31 The company paid $1,400 cash in dividends to the owner (sole shareholder).

Required 3. Prepare the statement of cash flows for the month of May

Expenses paid in cash is $5,030 and the closing cash balance is $42,780.

See the step by step solution

Step by Step Solution

Computation of expenses paid in cash

Preparation of cash flow statement

Gram CO.

Statement of cash flow

As of May 31

Particulars

Amount ($)

Amount ($)

Cash flows from operating activities

11,100

Cash paid for expenditures

-5,030

Net cash flow from operating activities

6,070

Cash flows from investing activities

Office equipment purchased

-1,890

Net cash used in investing activities

-1,890

Cash flows from financing activities

Common stock issued

40,000

Dividend paid

-1,400

Net Cash flows from financing activities

38,600

Net increase in cash

42,780

Cash balance, May 1

0

Cash balance, May 31

42,780

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