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Exercise 11-10 Prepare a statement of cash flows-indirect method (LO11-2, 11-3) The balance sheet for Plasma...

Exercise 11-10 Prepare a statement of cash flows-indirect method (LO11-2, 11-3)

The balance sheet for Plasma Screens Corporation, along with additional information, are provided below:

PLASMA SCREENS CORPORATION
Balance Sheets
December 31, 2018 and 2017
2018 2017
  Assets:
  Current assets:
      Cash $ 108,900    $ 126,800   
      Accounts receivable 82,000    97,000   
      Inventory 105,000    89,000   
      Prepaid rent 6,000    3,000   
  Long-term assets:
      Land 530,000    530,000   
      Equipment 830,000    720,000   
      Accumulated depreciation (438,000)   (288,000)  
          Total assets $ 1,223,900    $ 1,277,800   
  Liabilities and Stockholders' Equity:
  Current liabilities:
      Accounts payable $ 109,000    $ 94,000   
      Interest payable 6,900    13,800   
      Income tax payable 10,000    6,000   
  Long-term liabilities:
      Notes payable 115,000    230,000   
  Stockholders' equity:
      Common stock 750,000    750,000   
      Retained earnings 233,000    184,000   
         Total liabilities and stockholders' equity $ 1,223,900    $ 1,277,800   


Additional Information for 2018:

1. Net income is $79,000.

2. The company purchases $110,000 in equipment.

3. Depreciation expense is $150,000.

4. The company repays $115,000 in notes payable.

5. The company declares and pays a cash dividend of $30,000.  

Required:

Prepare the statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Solutions

Expert Solution

Cash flow from Operating activities
Net income 79,000
Adjustments to reconcile net income to net
cash from Operating activities
Depreciation expense 150,000
Decrease in accounts receivable 15000
increase in inventory -16000
increase in prepaid rent -3000
increase in accounts payable 15000
decrease in interest payable -6900
increase in income taxes payable 4000
net cash from operating activities 237,100
Cash flows from Investing Activities
Purchase of Equipment -110,000
Net cash flows from investing activities -110,000
Cash flows from financing activitiies
payment of notes payable -115,000
payment of cash dividends -30,000
Net cash flow from financing activities -145,000
Net increase (decrease) in cash -17,900
cash at the beginning of the period 126,800
Cash at the end of the period 108,900

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