Question

Skysong Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

SKYSONG INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
		12/31/17			12/31/16
Cash		$5,900			$7,000
Accounts receivable		61,400			51,500
Short-term debt investments (available-for-sale)		35,000			18,200
Inventory		40,000			60,500
Prepaid rent		5,000			4,100
Equipment		152,900			131,100
Accumulated depreciation—equipment		(35,200	)		(25,100	)
Copyrights		45,800			50,000
Total assets		$310,800			$297,300
Accounts payable		$46,100			$40,100
Income taxes payable		3,900			5,900
Salaries and wages payable		8,000			4,000
Short-term loans payable		8,100			10,000
Long-term loans payable		60,400			69,300
Common stock, $10 par		100,000			100,000
Contributed capital, common stock		30,000			30,000
Retained earnings		54,300			38,000
Total liabilities & stockholders’ equity		$310,800			$297,300

SKYSONG INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue				$332,700
Cost of goods sold				176,000
Gross profit				156,700
Operating expenses				119,300
Operating income				37,400
Interest expense		$11,500
Gain on sale of equipment		2,100		9,400
Income before tax				28,000
Income tax expense				5,600
Net income				$22,400

Additional information:

1.		Dividends in the amount of $6,100 were declared and paid during 2017.
2.		Depreciation expense and amortization expense are included in operating expenses.
3.		No unrealized gains or losses have occurred on the investments during the year.
4.		Equipment that had a cost of $19,800 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

SKYSONG INC.
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net Income		22,400
Adjustments to reconcile net income to net cash provided operating activities:
Depreciation expense	23,960
Amortization expense	4,200
Gain on sale of equipment	(2,100)
Increase in accounts receivable	(9,900)
Decrease in inventory	20,500
Increase in prepaid rent	(900)
Increase in accounts payable	6,000
Decrease in income tax payable	(2,000)
Increase in salaries and wages payable	4,000
		43,760
Net cash provided by operating activities:		66,160
Cash flows from investing activities:
Sale of equipment	8,040
Purchase of equipment	(41,600)
Purchase of short-term debt investments	(16,800)
Net cash used by investing activities:		(50,360)
Cash flows from financing activities:
Payment of short-term notes payable	(1,900)
Payment of long-term notes payable	(8,900)
Payment of dividends	(6,100)
Net cash used by financing activities:		(16,900)
Net increase (decrease) in cash		(1,100)
Cash balance at December 31, prior year		7,000
Cash balance at December 31, current year		5,900