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 $ 33,440 $ 28,400 Accounts Receivable 34,200 27,600 Inventory 40,200 37,600 Equipment 115,000 96,000 Accumulated Depreciation—Equipment (29,200 ) (24,600 ) $ 193,640 $ 165,000 Accounts Payable $ 35,200 $ 26,600 Salaries and Wages Payable 1,440 1,600 Note Payable (long-term) 34,400 40,000 Common Stock 86,200 72,200 Retained Earnings 36,400 24,600 $ 193,640 $ 165,000 Income Statement Sales Revenue $ 116,000 Cost of Goods Sold $ 68,000 Other Expenses 36,200 Net Income $ 11,800 Additional Data: Bought equipment for cash, $19,000. Paid $5,600 on the long-term note payable. Issued new shares of stock for $14,000 cash. No dividends were declared or paid. Other expenses included depreciation, $4,600; Salaries and wages, $19,600; taxes, $5,600; utilities, $6,400. 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

Solution:

XS Supply Company
Statement of Cash Flows
For Current Year
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$11,800.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense	$4,600.00
Increase in accounts receivables ($34,200 - $27,600)	-$6,600.00
Increase in inventory ($40,200 - $37,600)	-$2,600.00
Increase in accounts payable ($35,200 - $26,600)	$8,600.00
Decrease in Salaries and wages payable ($1,600 - $1,440)	-$160.00
Net Cash provided by operating activities		$15,640.00
Cash Flow from Investing Activities:
Purchase of equipment	-$19,000.00
Net Cash used in Investing activities		-$19,000.00
Cash Flow from Financing Activities:
Payment of long term note	-$5,600.00
Proceed from issue of common stock	$14,000.00
Net Cash Provided by financing activities		$8,400.00
Net Increase / (Decrease) in Cash		$5,040.00
Cash balance at beginning of year		$28,400.00
Cash balance at end of year		$33,440.00