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).)