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Colorado Corporation was organized at the beginning of the year, with the investment of $250,000 in cash by its stockholders. The company immediately purchased an office building for $300,000, paying $210,000 in cash and signing a three-year promissory note for the balance. Colorado signed a five-year, $60,000 promissory note at a local bank during the year and received cash in the same amount. During its first year, Colorado collected $93,970 from its customers. It paid $65,600 for inventory, $20,400 in salaries and wages, and another $3,100 in taxes. Colorado paid $5,600 in cash dividends.
Required:
1. Prepare a statement of cash flows for the year.
2. What does this statement tell you that an income statement does not?

Respuesta :

Parrain

Based on the given figures for Colorado Corporation, the statement of cash flows for the year would be:

Cash flow for Operating Activities

Cash from customers                                                                  93,970  

Less:

Cash for inventory                                                65,600

Salaries and Wages                                             20,400

Taxes                                                                       3,100           ( 89,100)

Net Cash from Operating Activities                                            4,870  

Cash flow from Investing Activities

Purchase of office building                                                      (210,000)

Net cash used for Investing Activities                                     (210,000)

Cash flow from Financing Activities

Issuance of Common stock                                                     250,000

Note Payable                                                                              60,000

Dividend payment                                                                      (5,600)

Net cash from Financing Activities                                        304,400

Net increase in cash                                                                 99,270

Opening cash balance                                                                      0

Closing cash balance                                                                99,270

What does the statement of cash flows show?

It shows transactions that involve actual cash being spent or gained by the company.

This allows Colorado Corporation to know the actual amount of cash it has for operations.

An Income statement on the other hand, shows the transactions that a business gets involved in regardless of whether they involve actual cash or not. This means that it cannot show the actual amount of cash that a business has.

Find out more on the statement of cash flows at https://brainly.com/question/735261.

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