Question

Polk Street Homes had the following cash transactions for the month ended July 31, 2018.

Cash receipts:

Collections from customers $ 25,000

Issued common stock 13,000

Cash payments:

Rent 500

Utilities 2,000

Salaries 1,500

Purchase of equipment 25,000

Payment of cash dividends 4,000

Cash balance, July 1, 2018 14,000

Cash balance, July 31, 2018 19,000

Prepare the statement of cash flows for Polk Street Homes for the month ended

July 31, 2018.

Short answer

The cash flow statement is shown as follows:

Polk Street Homes
Statement of Cash Flows
Month Ended July 31, 2018
Cash flows from operating activities:
Receipts:
Collections from customers		$25,000
Payments
To rent	$(500)
To utilities	(2,000)
To employees	(1,500)	(4,000)
Net cash provided by operating activities		21,000
Cash flows from investing activities:
Purchase of equipment	(25,000)
Net cash used by investing activities		(25,000)
Cash flows from financing activities:
Issued common stock	13,000
Payment of cash dividend	(4,000)
Net cash provided by financing activities		9,000
Net increase in cash		5,000
Cash balance, July 1, 2018		14,000
Cash balance, July 31, 2018		$19,000

Step-by-step solution

Explanation on Statement of Cash Flows

It is the part of the financial statements, which reports the net change in the cash balance of the business, by recording all cash transactions for the period.

Statement of cash flows

Cash flow from operating activities equals $21,000, cash flow from financing activities equals ($25,000), cash flow from financing activities equals $9,000 and net increase in cash equals $5,000.