Please help
Cash Flow versus Net Income Shelia Young started a real estate business at the beginning of January. After approval by the state for a charter to incorporate, she issued 1,000 shares of stock to herself and deposited $20,000 in a bank account under the name Young Properties. Because business was booming, she spent all of her time during the rst month selling properties rather than keeping nancial records. At the end of January, Shelia comes to you with the following plight: I put $20,000 in to start this business at the beginning of the month. My January 31 bank statement shows a balance of $17,000. After all of my efforts, it appears as if I'm "in the hole" already! 0n the other hand, that seems impossiblewe sold five properties for clients during the month. The total sales value of these properties was $600,000, and I received a commission of 5% on each sale. Granted, one of the five sellers still owes me an $8,000 commission, but the other four have been collected in full. Three of the sales, totaling $400,000, were actually made by my assistants. I pay them 4% of the sales value of a property. Sure, I have a few ofce expenses for my car, utilities, and a secretary, but that's about it. How can I have possibly lost $3,000 this month? You agree to help Shelia figure out how she did this month. The bank statement is helpful. The total deposits during the month amount to $22,000. Shelia explains that this amount represents the commissions on the four sales collected so far. The canceled checks reveal the following expenditures: Check No. PayeeMemo at Bottom of Check Amount 101 Stevens Office Supply 1; 2,000 102 Why Walk, Let's Talk Motor Co.new car 3,000 103 City of Westbrookheat and lights 500 104 Alice Hillsecretary 2,200 105 Ace Property Managementofce rent for month 1,200 106 Jerry Hayes {sales assistant) 10,000 106 Jerry Hayes (sales assistant) 10,000 107 Joan Harper (sales assistant) 6,000 108 Don's Fillitup-gas and oil for car 100 According to Shelia, the $2,000 check to Stevens Office Supply represents the down payment on a word processor and a copier for the office. The remaining balance of $3,000 must be paid to Stevens by February 15. Similarly, the $3,000 check is the down payment on a car for the business. A $12,000 note was given to the car dealer and is due along with interest in one year.Young Properties Statement of Cash Flows For the Month of January Cash flows from operating activities: Cash collected in commissions 3,000 X Cash paid for: Commissions v 8,000 X Utilities v 500 X Salaries and wages Rent v Gas and oil v 0 X Net cash provided by operating activities Cash flows from investing activities: Down payment on office equipment v Down payment on automobile v Net cash used by investing activities Cash flows from financing activities:Cash paid for: Commissions v 8,000 X Utilities 500 X Salaries and wages Rent Gas and oil v 0 X Net cash provided by operating activities Cash flows from investing activities: Down payment on office equipment Down payment on automobile v Net cash used by investing activities Cash flows from financing activities: Cash contributed by owner v Net increase in cash 49,450 X Feedback
