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).)