Question

Condensed financial data of Indigo Corporation follow.

Indigo Corporation Comparative Balance Sheets December 31
Assets		2022			2021
Cash		$ 210,080			$ 125,840
Accounts receivable		228,280			98,800
Inventory		292,500			267,410
Prepaid expenses		73,840			67,600
Long-term investments		358,800			283,400
Plant assets		741,000			630,500
Accumulated depreciation		(130,000	)		(135,200	)
Total		$1,774,500			$1,338,350
Liabilities and Stockholders’ Equity
Accounts payable		$ 265,200			$ 174,980
Accrued expenses payable		42,900			54,600
Bonds payable		286,000			379,600
Common stock		572,000			455,000
Retained earnings		608,400			274,170
Total		$1,774,500			$1,338,350

Indigo Corporation Income Statement Data For the Year Ended December 31, 2022
Sales revenue				$1,009,996
Less:
Cost of goods sold		$352,196
Operating expenses, excluding depreciation		32,266
Depreciation expense		120,900
Income tax expense		70,928
Interest expense		12,298
Loss on disposal of plant assets		19,500		608,088
Net income				$ 401,908

Additional information:

1.		New plant assets costing $260,000 were purchased for cash during the year.
2.		Old plant assets having an original cost of $149,500 and accumulated depreciation of $126,100 were sold for $3,900 cash.
3.		Bonds payable matured and were paid off at face value for cash.
4.		A cash dividend of $67,678 was declared and paid during the year.

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).)

Answer 1

Statement of Cash Flow ( Indirect Method)
For the year ended December 31,2022
Particulars		Amount	Working
Cash flows from operating activities
Net income		401,908	Given
Adjustments to reconcile net income to cash flow from operating activities
Depreciation Expense	120,900		Given
Loss on disposal of plant assets	19,500		Given
Increase in accounts receivables	-129,480		(98,800-228,280 )
Increase in inventory	-25,090		(267,410-292,500 )
Increase in prepaid expenses	-6,240		(67,600-73,840 )
Decrease in accured expenses payable	-11,700		(42,900-54,600 )
Increase in accounts payable	90,220		(265,200-174,980 )
		58,110
Cash flows from operating activities		460,018
Cash flows from investing activities
Sale of Plant Asset	3,900
Purchase of Plant assets	-260,000		(630,500-149,500-741,000 )
Purchase of long term investments	-75,400		(283,400-358,800 )
Cash flows from (used in ) investing activities		-331,500
Cash flows from financing activities
Redemption of Bond Payable	-93,600		(286,000-379,600 )
Proceeds from issue of common stock	117,000		(572,000-455,000 )
Dividend paid	-67,678		Given
Cash flows from (used in ) financing activities		-44,278
Net increase in cash and cash equivalents (A)		84,240
Cash and cash equivalents at beginning of period (B)		125,840
Cash and cash equivalents at end of period =A+B		210,080