Reference no: EM132728257
Question - You have been hired by Gena, the owner of Gamma Garments, to help her understand her business's cash flow situation. Gena is concerned that despite making a profit in the previous year, the business's cash balance has decreased significantly. Gena has provided you with the below income statement for the year ended 31 December 2019: Sales (net) $ 56,600 Cost of goods sold (31,400) Gross profit $ 25,200 Salaries expense $ 19,200 Depreciation expense 2,800 Other expenses (all cash) 1,000 Total operating expenses (23,000) Net income $ 2,200 Upon investigation, you discover that Gamma Garments' cash balance was $10,300 on 01 January 2019 and $5,100 on 31 December 2019. You also identify the below changes: Accounts receivable $4,200 increase Inventory $5,600 decrease Accounts payable $2,500 decrease Salaries payable $1,200 increase You also determine that during 2019 the business sold equipment for $4,800; purchased land for $13,000; and issued a note payable for $7,500; all for cash. Gena also withdrew $9,600.
REQUIRED -
(a) Determine Gamma Garments' net operating cash flows for 2019. Show all workings.
(b) Determine Gamma Garments' net investing cash flows for 2019. Show all workings.
(c) Determine Gamma Garments' net financing cash flows for 2019. Show all workings.
(d) Explain to Gena why her business has suffered a decrease in cash despite making a profit in 2019 and suggest to her what she could do to improve the business' future cash flows.
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