Cash flow exercise2

1. Cash Flow Statement Exercise 2
1. The following is the cash account of Los Huevos Ltd. for the years 2013 and 2014:
Cash a/c
Jan 1 13 Balance $2400
Mar 11 Sales $35000
Mar 29 Debtor $24500
Apr 8 Sales $12000
May 14 Capital $5000
Jul 3 Debtors $16250
Aug 16 Computers $9000
Oct 31 Rent revenue $4000
Nov 27 Loan $11400
Dec 31 Balance $12720
$132270
Feb 22 Drawings $7500
Mar 14 Accrued $2970
Advertising
Apr 20 Computers $25500
May 10 Inventory $32300
May 25 Office Exp. $4850
Jun 11 Creditors $23900
Aug 7 Salary $16170
Sept 30 Sales Return $1960
Nov 1 Furnitures $7200
Dec 16 Inventory $9920
$132270
Cash a/c
Jan 9 Bank Loan $20000
Feb 13 Rent Revenue $3500
Mar 20 Sales $36000
Apr 17 Debtors $12700
May 8 Debtors $8280
Jun 6 Machinery $19000
Jul 14 Inventory $1300
Aug 12 Accrued Rent $500
Sept 2 Sales $27500
Nov 18 Inventory $670
Dec 31 Balance $4200
$133650
Jan 1 14 Balance $12720
Feb 14 Inventory $37820
Mar 23 Machinery $36000
Apr 12 Creditors $10200
May 18 Sales Return $850
Jul 4 Inventory $9400
Aug 26 Interest $1100
Sept 29 Salary $18860
Oct 1 4 Drawings $5200
Nov 25 Drawings $1500
______
$133650
a) Prepare one cash flow statement for the business for each year.
b) Comment on the cash balance and net cash flows for both 2013 and 2014.
c) Suggest 3 ways to improve the cash flow of Los Huevos Ltd in year 2014.
2. Explain the 3 main purposes of a cash flow statement.
3. It is said that a business can show a profit during an accounting period but experience negative
net cash flow at the same time. How is this possible? Explain. Discuss also the opposite situation
(i.e. showing a loss but having a positive net cash flow).