Should I cash my check from AFLAC?

Statement of Cash Flows (check my math on this one too)?

• Need help setting up a cash flow statement with information given.? I am unfamiliar with accounting and having difficultly with this question, I don't even know where to start. The question is Determine the cash that Sears will have available to pay a dividend on December 31, 2011. Round to the nearest dollar. Sears Co., a specialty retailer, has a history of paying quarterly dividends of $0.50 per share. Management is trying to determine whether the company will have adequate cash on December 31, 2011, to pay a dividend if one is declared by the board of directors. The following additional information is available: All sales are on account, and accounts receivable are collected one month after the sale. Sales volume has been increasing 5% each month. All purchases of merchandise are on account, and accounts payable are paid one month after the purchase. Cost of sales is 40% of the sales price. Inventory levels are maintained at $75,000. Operating expenses in addition to the mortgage are paid in cash. They amount to $3,000 per month and are paid as they are incurred. Balance Sheet Sept 30th 2011 Cash 5,000 Accounts Payable 5,000 Acct. Receivable 12,500 Mortgage Note 150,000 Inventory 75,000 Common Stock 1$ par 50,000 Note Receivable 10,000 Retained Earnings 66,500 Building/Land 169000 Totals 271,500 Total Asset 271,500 Notes Rec. represent a 5% interest bearing note due Nov. 2011 Mortage note is a 30 year 7% note due in monthly installments of 1,200. Okay So accounts Recieveable for 4 months at a 5% increase per month winds up being 53876+ 10,000 (note receiveable) and +500 for its interest+ 20,000 (5k cash x 4). That should wind up to be 84276 as Cash In. Cash out 21551 (after removing 40% cost sales per month for 4 months from Acct. Receivable and rounded to nearest dollar)+12,000 (operating expense x 4 months)+4800 (mortgage installments x4 although not sure if it should be 3600 and not 4800) + 20k (accounts payable x 4). Which should equal out to 58351. Cash in= Cash out= 26025 left over to pay out a 25,000 dividend? Is my math correct or did I mess up somewhere?

• Answer:

  *Edit: There are four months mentioned. But since cash is not collected form Accounts Receivable until one month after the sale and cash is not paid on Accounts Payable until one month after the purchase, cash will be collected and paid in only three months: October for September, November for October, and December for November. All sales (Accounts Receivable) and all purchases (Accounts Payable) made in December will not be collected or paid for until January of the following year. So it will not affect cash flow before Dec. 31, 2011. First of all, one quarter of a year is 3 months not 4. Accounts Receivable October $12,500 collected from September sales October sales = 12,500 x 1.05 = $13,125 November $13,125 collected from October sales November sales = 13,125 x 1.05 = $13,781 (rounded) December $13,781 collected from November sales Total cash received from sales = 12,500 + 13,125 + 13,781 = $39,406 Notes Receivable 10,000 x 1.05 = $10,500 cash collected Accounts Payable October $5,000 paid for September purchases. October Purchases = 13,125 x 40% = $5,250 November $5,250 paid for October purchases November Purchases = 13,781 x 40% = $5,512 December $5,512 paid for November purchases Total cash paid for purchases = 5,000 + 5,250 + 5,512 = $15,762 Cash paid for expenses $3,000 x 3 = $9,000 Cash paid for mortgage payments 1,200 x 3 = $3,600 Cash Flow Summary 5,000 beginning cash balance + 39,406 collected from A/R + 10,500 collected from notes receivable - 15,762 paid for A/P - 9,000 paid for expenses - 3,600 paid for mortgage payments = $26,544 available for dividends