In: Accounting
Exercise 22-14 (b) (indirect method)
Indigo Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:
INDIGO INC. Comparative Statement of Financial Position December 31 |
|||||||
---|---|---|---|---|---|---|---|
2020 | 2019 | ||||||
Cash |
$52,795 | $25,120 | |||||
Accounts receivable |
58,040 | 51,090 | |||||
Inventory |
39,980 | 60,020 | |||||
Prepaid rent |
5,270 | 4,170 | |||||
Equipment |
157,450 | 130,110 | |||||
Accumulated depreciation–equipment |
(35,270 | ) | (25,170 | ) | |||
Goodwill |
20,000 | 60,000 | |||||
Total assets |
$298,265 | $305,340 | |||||
Accounts payable |
$46,250 | $40,110 | |||||
Income tax payable |
3,980 | 6,020 | |||||
Salaries and wages payable |
8,120 | 4,120 | |||||
Short–term loans payable |
8,040 | 10,090 | |||||
Long–term loans payable |
60,000 | 79,000 | |||||
Common shares |
130,000 | 130,000 | |||||
Retained earnings |
41,875 | 36,000 | |||||
Total liabilities and shareholders’ equity |
$298,265 | 305,340 |
INDIGO INC. Income Statement Year Ending December 31, 2020 |
|||||
---|---|---|---|---|---|
Sales revenue |
$348,085 | ||||
Cost of goods sold |
165,000 | ||||
Gross margin |
183,085 | ||||
Operating expenses |
120,000 | ||||
Operating income |
63,085 | ||||
Interest expense |
$11,600 | ||||
Impairment loss–goodwill |
40,000 | ||||
Gain on disposal of equipment |
(2,300 | ) | 49,300 | ||
Income before income tax |
13,785 | ||||
Income tax expense |
4,110 | ||||
Net income |
$9,675 |
Additional information:
1. | Dividends on common shares in the amount of $3,800 were declared and paid during 2020. | |
2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $72,000. | |
3. | Equipment with a cost of $34,000 that was 70% depreciated was sold during 2020. |
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).)