Question

Dive In Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement are presented below.

	Current Year				Previous Year
Balance Sheet at December 31
Cash	$	4,460			$	5,305
Accounts Receivable		1,900				950
Prepaid Rent		190				95
Total Assets	$	6,550			$	6,350
Salaries and Wages Payable	$	800			$	2,000
Common Stock		2,100				1,450
Retained Earnings		3,650				2,900
Total Liabilities and Stockholders’ Equity	$	6,550			$	6,350
Income Statement
Service Revenue	$	43,850
Salaries and Wages Expense		39,000
Rent and Office Expenses		4,100
Net Income	$	750

Additional Data:

Rent is paid in advance each month, and Office Expenses are paid in cash as incurred.

An owner contributed capital by paying $650 cash in exchange for the company’s stock.

Required:
1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Dive in Company
Cash Flow Statement
For the current year ended December 31
A. Cash Flows from Operating Activity
Net Income		$              750.00
Adjustments
Increase in Accounts receivables	$                  (950.00)
Increase in prepaid rent	$                    (95.00)
Decrease in salaries and wages payable	$              (1,200.00)
		$        (2,245.00)
Net cash flow from Operating activities		$        (1,495.00)
B. Cash flows from Investing Activities
Net Cash flows from Investing activities		$                       -
C. Cash Flows from Financing activities
Issue of Common stock	$                    650.00
Cash flows from Financing activities		$              650.00
Net Increase (Decrease) in Cash [A+B+C]		$            (845.00)
Cash at the beginning		$          5,305.00
Cash at the end		$          4,460.00