Question

A) Portions of the financial statements for Horizon Telecom are provided below.  

HORIZON TELECOM Income Statement For the Year Ended December 31, 2021
Revenues			$	615,000
Expenses:
Cost of goods sold	$	370,000
Operating expenses		117,000
Depreciation expense		33,000
Income tax expense		47,500
Total expenses				567,500
Net Income			$	47,500

HORIZON TELECOM Selected Balance Sheet Data December 31, 2021
Increase in accounts receivable	$ 5,700
Increase in inventory	11,700
Decrease in prepaid rent	9,800
Increase in operating expenses payable	5,900
Decrease in accounts payable	6,300
Increase in income tax payable	21,300

Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the indirect method. (Amounts to be deducted and negative values should be indicated by minus sign.)

B) Bonnie Hilfiger has the following balances in its stockholders' equity accounts on December 31, 2021: Treasury Stock, $375,000; Common Stock, $350,000; Preferred Stock, $1,200,000; Retained Earnings, $1,675,000; and Additional Paid-in Capital, $3,100,000.
Prepare the stockholders' equity section of the balance sheet for Donnie Hilfiger as of December 31, 2021. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

A.

Horizon Telecom
Cash flow from Operating Activities
Net income	47,500
Add: Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	33,000
Changes in current operating assets and liabilities:
Increase in accounts receivable	-5,700
Increase in inventory	-11,700
Decrease in prepaid rent	9,800
Increase in operating expenses payable	5,900
Decrease in accounts payable	-6,300
Increase in income tax payable	21,300
Net cash flows from Operating Activities	$93,800

B.

Stockholders Equity Section
Commons stock	350,000
Preferred stock	1,200,000
Additional paid in capital	3,100,000
Total paid in capital	4,650,000
Retained earnings	1,675,000
Total	6,325,000
Treasury stock	-375,000
Total stockholders equity	$5,950,000

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