Question

Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. GOLDEN CORPORATION Comparative Balance Sheets December 31 Current Year Prior Year Assets Cash $ 165,000 $ 108,100 Accounts receivable 84,500 72,000 Inventory 602,500 527,000 Total current assets 852,000 707,100 Equipment 337,600 300,000 Accum. depreciation—Equipment (158,500 ) (104,500 ) Total assets $ 1,031,100 $ 902,600 Liabilities and Equity Accounts payable $ 89,000 $ 72,000 Income taxes payable 29,000 25,600 Total current liabilities 118,000 97,600 Equity Common stock, $2 par value 593,200 569,000 Paid-in capital in excess of par value, common stock 197,800 161,500 Retained earnings 122,100 74,500 Total liabilities and equity $ 1,031,100 $ 902,600 GOLDEN CORPORATION Income Statement For Current Year Ended December 31 Sales $ 1,797,000 Cost of goods sold 1,087,000 Gross profit 710,000 Operating expenses Depreciation expense $ 54,000 Other expenses 495,000 549,000 Income before taxes 161,000 Income taxes expense 23,400 Net income $ 137,600 Additional Information on Current Year Transactions Purchased equipment for $37,600 cash. Issued 12,100 shares of common stock for $5 cash per share. Declared and paid $90,000 in cash dividends. Required: Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.) Prepare a complete statement of cash flows using a spreadsheet under the indirect method.

Answer 1

GOLDEN CORPORATION
Spreadsheet for statement of cash flow
For the current period ended December 31
		Analysis of Changes	.
	Prior period	Debit	Credit	Current period
Balance sheet debit balance account
Cash	1,08,100	56,900		1,65,000
Accounts receivable	72,000	12,500		84,500
Inventory	5,27,000	75,500		6,02,500
Equipment	3,00,000	37,600		3,37,600
	1007100			11,89,600
Balance sheet Credit balance account
Accumulated depreciation-Equip.	104500		54,000	158500
Accounts payable	72,000		17,000	89,000
Income taxes payable	25,600		3,400	29,000
Common stock, $2 par value	5,69,000		24,200	5,93,200
Paid-in capital in excess of par value, common stock	1,61,500		36,300	1,97,800
Retained earnings	74,500		47,600	1,22,100
	10,07,100			11,89,600

Statement of Cash flow
Operating Activities:
Net Income		1,37,600
Adjustment to net income to reconcile
to net cash flow provided by operating activities:
Add: Depreciation	54,000
Less: Increase in accounts receivable	-12,500
Less: Increase in Inventory	-75,500
Add: Increase in accounts payable	17,000
Add: Increase in income tax payable	3,400
		-13,600
Net cash flow provided by operating activities		1,24,000
Investing activities:
Equipment purchased	-37,600
Net cash used for investing activities		-37,600
Financing activities:
Common stock issued	60,500
Dividend paid	-90,000
Net cash used for financing activities		-29,500
Net change in cash flow		56,900
Add: Beginning balance of cash		1,08,100
Ending balance of cash		1,65,000