1. F.Inc is in the declining phase of its firm. The firm is contemplating to shut down its
business if the losses are expected to arise more than expected in the decline phase.
The firm has expected to undertake the sale of its various investments. Determine the
amount of proceeds from the sale of investments using the information as follows:
Net increase in cash and cash equivalents $20,500
Net cash used in financing activities ($40,000)
Net cash flow from operating activities $170,000
Capital expenditures $16,500
Subject: Accounting
Sub-subject: The Statement of Cash Flows
Topic: Cash Flow Statement
Step 1:
A Cash Flow Statement documents the money that the company receives and spends over a
particular period. This financial document allows investors, creditors and analysts to find out
how solid the company’s finances are and whether it can pay its debts and operate smoothly.
Explanation:
Cash Flow Statements consist of these three different parts: operating cash flows, investing
cash flows and financing cash flows. All of the sections give information about different
aspects of a company’s finances.
Step 2:
Computation of the Proceeds from sale of investments
Proceeds ¿ sale of investments=Cash Flow ¿ Investing Activities ( CFIA ) +Capital Expenditures
Proceeds ¿ sale of investments=−$ 109,500+ $ 16,500
Proceeds ¿ sale of investments=−$ 93,000
,Working note
Investing Cash Flow=Change∈Cash−OperatingCash Flow−Financing Cash Flow
Investing Cash Flow=$ 20 , 500−$ 170 , 000−$ (−40 ,000)
InvestingCash Flow=$−109 , 500
Note: Since the net result is negative, it shows that the firm did not realize any proceeds from
its investments, but instead bought new investments.
Explanation:
A company has a positive cash flow from operating activities when it can handle its everyday
costs and responsibilities.
Final Solution:
In conclusion, Proceeds from the sale of investments are $93,000, based on net cash flow and
capital expenditures data.
2. L.Inc is in the firm having 600,000 shares at the starting of the year. Some of the
debenture holders of the company decided to convert their debenture holdings into
100,000 shares in the second quarter. In the fourth quarter. the company has decided
on a buy-back of 20,000 shares. The firm has reported the preferred dividends of
$150,000 and the basic earning per share is $1.06. Determine what was the net
income earned by L.Inc during the year?
Subject: Accounting
Sub-subject: Financial Accounting
Topic: Earning Per Shares
Step 1:
Earnings Per Share (EPS) helps you calculate how much profit each share of the company’s
common stock earned. An average EPS is made by dividing net income for common
shareholders by the total number of shares outstanding during that period.
, Explanation:
EPS is considered by investors and analysts to judge how well a company is doing financially
and its role in setting the company’s valuation is great.
Step 2:
Computation of the Net income earned by L.Inc
Net income earned by L. Inc=Basic EPS∗Weighted average shares+ Preferred Dividends
Net income earned by L. Inc=1.06 ×670 ,000+ $ 150000
Net income earned by L. Inc=$ 860200
Working note
a. January to March (3 months)
January ¿ March ( 3 months )=Shares∗3/12
January ¿ March ( 3 months )=60,000∗3/12
January ¿ March ( 3 months )=150,000
b. April ¿ September (6 months)
April ¿ September (6 months)=Shares∗6 /12
business if the losses are expected to arise more than expected in the decline phase.
The firm has expected to undertake the sale of its various investments. Determine the
amount of proceeds from the sale of investments using the information as follows:
Net increase in cash and cash equivalents $20,500
Net cash used in financing activities ($40,000)
Net cash flow from operating activities $170,000
Capital expenditures $16,500
Subject: Accounting
Sub-subject: The Statement of Cash Flows
Topic: Cash Flow Statement
Step 1:
A Cash Flow Statement documents the money that the company receives and spends over a
particular period. This financial document allows investors, creditors and analysts to find out
how solid the company’s finances are and whether it can pay its debts and operate smoothly.
Explanation:
Cash Flow Statements consist of these three different parts: operating cash flows, investing
cash flows and financing cash flows. All of the sections give information about different
aspects of a company’s finances.
Step 2:
Computation of the Proceeds from sale of investments
Proceeds ¿ sale of investments=Cash Flow ¿ Investing Activities ( CFIA ) +Capital Expenditures
Proceeds ¿ sale of investments=−$ 109,500+ $ 16,500
Proceeds ¿ sale of investments=−$ 93,000
,Working note
Investing Cash Flow=Change∈Cash−OperatingCash Flow−Financing Cash Flow
Investing Cash Flow=$ 20 , 500−$ 170 , 000−$ (−40 ,000)
InvestingCash Flow=$−109 , 500
Note: Since the net result is negative, it shows that the firm did not realize any proceeds from
its investments, but instead bought new investments.
Explanation:
A company has a positive cash flow from operating activities when it can handle its everyday
costs and responsibilities.
Final Solution:
In conclusion, Proceeds from the sale of investments are $93,000, based on net cash flow and
capital expenditures data.
2. L.Inc is in the firm having 600,000 shares at the starting of the year. Some of the
debenture holders of the company decided to convert their debenture holdings into
100,000 shares in the second quarter. In the fourth quarter. the company has decided
on a buy-back of 20,000 shares. The firm has reported the preferred dividends of
$150,000 and the basic earning per share is $1.06. Determine what was the net
income earned by L.Inc during the year?
Subject: Accounting
Sub-subject: Financial Accounting
Topic: Earning Per Shares
Step 1:
Earnings Per Share (EPS) helps you calculate how much profit each share of the company’s
common stock earned. An average EPS is made by dividing net income for common
shareholders by the total number of shares outstanding during that period.
, Explanation:
EPS is considered by investors and analysts to judge how well a company is doing financially
and its role in setting the company’s valuation is great.
Step 2:
Computation of the Net income earned by L.Inc
Net income earned by L. Inc=Basic EPS∗Weighted average shares+ Preferred Dividends
Net income earned by L. Inc=1.06 ×670 ,000+ $ 150000
Net income earned by L. Inc=$ 860200
Working note
a. January to March (3 months)
January ¿ March ( 3 months )=Shares∗3/12
January ¿ March ( 3 months )=60,000∗3/12
January ¿ March ( 3 months )=150,000
b. April ¿ September (6 months)
April ¿ September (6 months)=Shares∗6 /12
