Question

Exercise 11-10A Prepare a statement of cash flows—indirect method (LO11-3, 11-4, 11-5)

The balance sheets for Plasma Screens Corporation, along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2021 and 2020
	2021				2020
Assets
Current assets:
Cash	$	115,000			$	131,200
Accounts receivable		79,600				94,000
Inventory		99,000				83,600
Prepaid rent		4,800				2,400
Long-term assets:
Land		500,000				500,000
Equipment		806,000				690,000
Accumulated depreciation		(432,000	)			(276,000	)
Total assets	$	1,172,400			$	1,225,200
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	103,000			$	88,600
Interest payable		6,600				13,200
Income tax payable		8,800				5,400
Long-term liabilities:
Notes payable		110,000				220,000
Stockholders' equity:
Common stock		720,000				720,000
Retained earnings		224,000				178,000
Total liabilities and stockholders' equity	$	1,172,400			$	1,225,200

Additional Information for 2021:

1. Net income is $73,000.
2. The company purchases $116,000 in equipment.
3. Depreciation expense is $156,000.
4. The company repays $110,000 in notes payable.
5. The company declares and pays a cash dividend of $27,000.

Required:
Prepare the statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Cash Flow statement for year ended December 31, 2021
Particulars	Amount in $
Cash flows from operating activities
Net Income	73,000
Adjustments to arrive cash flow from operating activities:
Depreciation expense	156,000
Decrease in accounts receivables	14,400	=94000-79600
Increase in Inventory	-15,400	=83600-99000
Increase in Prepaid rent	-2,400	=2400-4800
Increase in accounts payable	14,400	=103000-88600
Decrease in interest payable	-6,600	=6600-13200
Increase in Income Tax payable	3,400	=8800-5400
Net Cash flow from operating activities	236,800
Cash flows from investing activities
Purchase of Equipment	-116,000
Net Cash flow from Investing activities	-116,000
Cash flows from financing activities
Repayment of Notes Payable	-110,000
Payment of cash dividends	-27,000
Net Cash flows from financing activities	-137,000
Net increase(decrease) in cash and cash equivalents (A)	-16,200
Cash and cash equivalents at beginning of period (B)	131,200
Cash and cash equivalents at end of period =A+B	115,000
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