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:

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, entertainment, recreation paid ...................................................6,000

Credit card debt at the end of the year .................................................2,500

Line of credit at the start of the year ...................................................2,500

Line of credit at the end of the year ....................................................1,200

Purchase of car ............................................................................20,000

Car loan at the end of the year .........................................................15,000

Cash account, beginning of year ............................................................500

Cash received from disposal of motorcycle .............................................1,000

Cash received from disposal of computer ................................................100

Cash account, end of year ................................................................1,000

Purchase of investments ..................................................................5,500

Student loan at the beginning of the year .............................................15,000

Student loan at the end of the year .....................................................10,000

Purchase of new computer ...............................................................1,500

Interest expense paid ......................................................................1,400

Instructions

(a) Prepare a statement of cash flow from information provided above using the direct method.

(b) 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?