# Lion, Inc. Cash Flows Case Study

Autor:   •  April 13, 2018  •  Case Study  •  902 Words (4 Pages)  •  76 Views

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1. Lion, Inc. has the following cash transactions for the period:

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Prepare a direct statement of cash flows, assuming the balance of cash at the beginning of the period was \$4,000.

 Statement of Cash Flows (Direct) Beginning cash 4000 Cash from Operations Cash received from the sale of products to customers 35000 Cash paid to merchandise supplier (11000) Cash paid to workers (23000) Cash paid for advertisement (3000) Cash received for sale of services to customers 25000 Total cash from operations 23000 Cash from Investing Cash paid to purchase factory equipment (45000) Cash received from the sale of an unused warehouse 12000 Total cash from investing (33000) Cash from Financing Cash received from the bank for long-term loans 40000 Cash paid for dividends to stockholders (5000) Total cash from financing 35000 Change in cash 25000 Ending cash 29000

1. During its first five years of operations, Jalen, Inc. reports net income and pays dividends as follows.

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Calculate the balance of retained earnings at the end of each year.

 Year Net income Dividends Retained Earnings 1 \$ 1,200 \$ 500 \$ 700 2 1,700 \$ 500 \$ 1900 3 2,100 1,000 \$ 3000 4 3,200 1,000 \$ 5200 5 4,400 1,000 \$ 8600

Retained earnings = Beginning Retained earnings + Net income – Dividends

Retained earnings (1) = 0 + 1200 – 500 = \$700

Retained earnings (2) = 700 + 1700 – 500 = \$1900

Retained earnings (3) = 1900 + 2100 – 1000 = \$3000

Retained earnings (4) = 3000 + 3200 – 1000 = \$5200

Retained earnings (5) = 5200 + 4400 – 1000 = \$8600

1. Consider the following unrelated scenarios:
1. Leon reports an increase in retained earnings of \$2.2 billion and net income of \$4.9 billion. What was the amount of dividends paid?

Dividends = Beginning Retained earnings + Net income – Retained earnings.

Dividends = 0 + \$4.9 billion – \$2.2 billion = \$2.7 billion

1. Moore reports an increase in retained earnings of \$2.4 billion and dividends of \$1.6 billion. What was the amount of net income?

Net income = Dividends + Retained earnings - Beginning Retained earnings.

Net income = \$1.6 billion + \$2.4 billion – 0 = \$4.0 billion

1. Nandu reports and increase in retained earnings of \$1.5 billion and net income of \$1.5 billion. What was the amount of dividends paid?

Dividends = Beginning Retained earnings + Net income – Retained earnings.

Dividends = 0 + \$1.5 billion – \$1.5 billion = \$ 0

1. Ovid reports beginning retained earnings of \$(1.8) billion, a net loss of \$0.9 billion, and no dividends. What is the amount of ending retained earnings?

Retained earnings = Beginning Retained earnings + Net income – Dividends

Retained earnings = \$(1.8) billion + \$(0.9) billion + 0 = \$(2.7) billion

1. Pulse reports ending retained earnings of \$1.36 billion, net income of \$0.33 billion, and dividends of \$0.05 billion. What is the amount of beginning retained earnings?

Beginning Retained earnings = Retained earnings (end) - Net income + Dividends.

Beginning Retained earnings = \$1.36 billion - \$0.33 billion + \$0.05 = \$1.08 billion

1. Consider the following unrelated scenarios related to cash flows:
1. Quartz reports operating cash flows of \$3.5 billion, investing cash flows of \$0.5 billion, and financing cash flows of \$(4.0) billion. What was the amount of total change in cash?
 Beginning cash 0 Operating cash flows \$3.5 billion Investing cash flows \$0.5 billion Financing cash flows \$(4.0) billion Change in cash 0

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