Question 1:

Use the following information and prepare an Income Statement (to calculate the net profit) and a Statement of Cash Flows (identify each payment separately) for the month. Identify 2 causes for the difference between net profit and cash flow from operating activities. Describe what the Cash Flow Statement reveals.

Bank balance beginning of month	15,600	Inventory purchased for cash	28,000
Bank balance, end of month	19,800	Miscellaneous expenses paid	8,000
Cash drawings	30,000	Payment on accounts payable	44,000
Cash sales	72,000	Proceeds from bank loan	93,000
Collections from accounts receivable	40,000	Proceeds from sale of motor vehicle	12,000
Cost of sales	69,000	Purchase of motor vehicle for cash	68,000
Credit sales	58,000	Rent expense	800
Depreciation	3,500	Rent paid in advance for the next 6 months	4,800
		Wages paid	30,000

1. Prepare an Income Statement to calculate the net profit.

Income Statement

	$	$