Question

A company annual financial statements at December 31, 2017. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

	2017			2016
Balance Sheet at December 31
Cash	$	48,375		$	34,100
Accounts Receivable		38,150			30,200
Merchandise Inventory		46,300			42,000
Property and Equipment		136,750			114,000
Less: Accumulated Depreciation		(37,550	)		(28,500	)
	$	232,025		$	191,800
Accounts Payable	$	44,000		$	32,400
Wages Payable		3,625			3,950
Note Payable, Long−Term		41,500			49,300
Contributed Capital		95,800			76,100
Retained Earnings		47,100			30,050
	$	232,025		$	191,800
Income Statement for 2017
Sales	$	165,000
Cost of Goods Sold		95,700
Other Expenses		52,250
Net Income	$	17,050

Additional Data:

1. Bought equipment for cash, $22,750.
2. Paid $7,800 on the long-term note payable.
3. Issued new shares for $19,700 cash.
4. No dividends were declared or paid.
5. Other expenses included depreciation, $9,050; wages, $23,000; taxes, $10,750; other, $9,450.
6. 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 year ended December 31, 2017, using the indirect method.

(Amounts to be deducted should be indicated by a minus sign)

Answer 1

Answer:

Cash Flow Statement

For the year ended December 31, 2017

Cash flow from operating activities:
Net Income	$17,050
Adjustment for:
Depreciation	$9,050
Operating profit before working capital changes	$26,100
Increase in accounts receivable	-$7,950
Increase in inventory	-$4,300
Increase in accounts payable	$11,600
Decrease in wages payable	-$325
Net cash from operating activities		$25,125
Cash flow from investing activities:
Payment made for the purchase of equipment	-$22,750
Net cash from operating activities		-$22,750
Cash flow from financing activities:
Repayment of long term note payable	-$7,800
Proceeds from issuance of new shares	$19,700
Net cash from financing activities		$11,900
Net increase in cash & cash equivalents		$14,275
Cash & cash equivalents at the beginning of the year		$34,100
Cash & cash equivalents at the end of the year		$48,375