Question

Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving \(35,000 cash. 2 Deposited the \)35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited \(73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid \)700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(5,000, within three months. 9 Received \)2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(1,200. 31 Received \)3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements 2. Prepare the following financial statements: d. Statement of cash flows

Short answer

Cash flow from operating activities equals $3,800, cash flow from investing activities equals $0, cash flow from financing activities equals $67,500 and net increase in cash equals $71,300.

Step-by-step solution

Explanation on Statement of Cash Flows

Statement of cash flows reports the net change in the cash balance of the business, by recording all cash transactions for the period.

Statement of cash flows

The cash flow statement is shown as follows:

Annette Pachelo, Attorney
Statement of Cash Flows
Month Ended March 31, 2018
Cash flows from operating activities:
Receipts:
Collections from customers (2800+3300)		$6,100
Payments
To miscellaneous expense	$(400)
To utilities	(1,200)
To office supplies	(700)	(2,300)
Net cash provided by operating activities		3,800
Cash flows from investing activities:
Net cash used by investing activities		0
Cash flows from financing activities:
Issued common stock	73,000
Payment of cash dividend	(5,500)
Net cash provided by financing activities		67,500
Net increase in cash		71,300
Cash balance, March 1, 2018		0
Cash balance, March 31, 2018		$71,300