Question

XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

	Current Year					Previous Year
Balance Sheet at December 31
Cash		$	32,570				$	27,500
Accounts Receivable			33,600					27,300
Inventory			39,600					37,300
Equipment			110,500					93,000
Accumulated Depreciation—Equipment			(28,600	)				(24,300	)
		$	187,670				$	160,800
Accounts Payable		$	34,600				$	26,300
Salaries and Wages Payable			1,170					1,300
Note Payable (long-term)			31,700					37,000
Common Stock			84,400					71,900
Retained Earnings			35,800					24,300
		$	187,670				$	160,800
Income Statement
Sales Revenue		$	113,000
Cost of Goods Sold			66,500
Other Expenses			35,000
Net Income		$	11,500

Additional Data:
a.	Bought equipment for cash, $17,500.
b.	Paid $5,300 on the long-term note payable.
c.	Issued new shares of stock for $12,500 cash.
d.	No dividends were declared or paid.
e.	Other expenses included depreciation, $4,300; Salaries and wages, $19,300; taxes, $5,300; utilities, $6,100.
f.	Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:
1.	Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

	XS SUPPLY COMPANY
	Statement of Cash Flows
	For the Year Ended December 31
Cash flows from operating activities:
Net income		11500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense	4300
Increase in accounts receivable	-6300
Increase in inventory	-2300
Increase in accounts payable	8300
Decrease in Salaries and wages payable	-130
		3870
Net cash provided by operating activities		15370
Cash flows from investing activities:
Cash payments to purchase equipment	-17500
Net cash used by investing activities		-17500
Cash flows from financing activities:
Cash payments on long-term note	-5300
Cash receipts from issuing stock	12500
Net cash provided by financing activities		7200
Net increase in cash during the year		5070
Cash balance, January 1		27500
Cash balance, December 31		32570