Week 4 EOC: Chapter 5 Quiz Question 2

a. Did the change in Cash reflect a Source or a Use of funds? What was the amount of that change?

b. Did the change in Net Receivables reflect a Source or a Use of funds? What was the amount of that change?

c. Did the change in Notes Payable reflect a Source or a Use of funds? What was the amount of that change?

d. Did the change in Retained Earnings reflect a Source or a Use of funds? What was the amount of that change?

e. What was the total amount of Sources and Uses of Funds?

Answers: 

a.  It was a Use of Funds in the amount of $14,000.

Cash on the balance sheet represents an account in the bank. When you withdraw money from the bank (decrease the cash account), you have a source of funds (MGT,149).

b.  It was a Use of Funds in the amount of $30,000. Accounts receivable represents money that guests owe you for products or services that you have provided (MGT, 149).

c.   It was a Use of Funds in the amount of $44,000. Notes payable are short-term loans (less than a year). If you decrease notes payable by paying back money you borrowed, this is a use of funds for you (MGT, 152).

d.  It was a Source of Funds in the amount of $104,000, Retained earnings represent the accumulated account of profits over the life of the business that have not been distributed as dividends. If your retained earnings increases, that means you have increased your net income for the year, thus providing a source of funds (MGT, 152).

e.  Total amount of Sources is $743,000 and the Total amount of Uses is $743,000.

Sources and uses of funds are the inflows and outflows of money affecting the cash position (MGT, 147).