Reference no: EM132990455
Your friend and colleague has been working for about a year since graduating from university. He has come to you for advice on his saving and spending habits. You have accumulated the following information on his savings and spending that has occurred over the past year:
Saving/Spending Amount $
Salary received over the last year, net of income tax 45,000
Rent and utilities paid 16,600
Car expenses paid 4,800
Credit card debt at the start of the year 1,000
Food, entertaining, recreation paid 6,000
Credit card debt at the end of the year 2500
Line of credit at the start of the year 2500
Line of credit at the end of the year 1200
Purchase of car 20000
Car loan at the end of the year 15000
Cash account balance at the beginning of the year 500
Cash received from disposal of motorcycle 1000
Cash received from disposal of computer 100
Cash account balance at the end of the year 1000
Purchase of Investments 5500
Student loan at the beginning of the year 15000
Student loan at the end of the year 10000
Purchase of new computer 1500
Interest expense paid 1400
Instructions
Problem 1: Prepare a statement of cash flow for your friend from information provided above using the direct method.
Problem 2: Can you provide some advice to your friend on how he could improve his cash flow strategies, such as managing debt levels and terms of payment?
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