Question

Prepare a statement of cash flows using the indirect method. Show all work.

[12]	Lion Enterprises					Balance Sheet
	Income Statement						12/31/20	12/31/21
	Year ended 12/31/2021					Cash	200	830
						A/R	830	750
						Inventory	600	640
Sales			7,500			Prepaid Insrn	20	50
Operating Expenses						Equipment	1800	1500
Cost of Goods Sold		$3,330				(Accum Depr)	-600	-700
Depreciation Expense		$240			TOTAL ASSETS		2850	3070
Insurance Expense		100				A/P	360	300
G & A Expenses		$1,750				Accured Pyrll	400	300
Total Operating Expense		$5,420	$(5,420)			IT payable	150	200
Income before income taxes			$2,080			N/P	600	800
Gain on sale of equipment			$50			Commn Stck	800	800
Net Income			$2,130			Retained Earnings	540	670
					TOTAL Liabilities & SE		2850	3070
		(12 points)
Prepare a statement of cash flows using the indirect method. Show all work.

Answer 1

Particulars		Amount	Amount
Net income before taxes		2,130
Adjustments to reconcile net income:
Depreciation		240
Loss/(gain) on sale of fixed asset		(50)
Decrease in Accounts receivable		80
(Increase in) Inventory		(40)
(Increase in) Prepaid expenses		(30)
		-
(Decrease in) Accounts payable		(60)
(Decrease in) Accrued payroll		(100)
Income taxes increase in liability		50
Net cash from operating activities		2,220	2,220
Cash flow from investing activities:
Cash from sale of equipment		210
Net cash from investing activities		210	210
Cash flow from financing activities:
(Cash paid) for dividends		(2,000)
Note payable issued		200
		-
		-
Net cash (used in) financing activities		(1,800)	(1,800)
Net change in cash			630
Add: Opening cash balance			200
Closing cash and cash equivalents			830

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