Question

Presented below are the 2018 income statement and comparative balance sheets for Santana Industries.

SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in thousands)
Sales revenue	$	17,650
Service revenue		6,800
Total revenue				$	24,450
Operating expenses:
Cost of goods sold		8,900
Selling		4,100
General and administrative		3,200
Total operating expenses					16,200
Operating income					8,250
Interest expense					370
Income before income taxes					7,880
Income tax expense					4,200
Net income				$	3,680

Balance Sheet Information ($ in thousands)	Dec. 31, 2018				Dec. 31, 2017
Assets:
Cash	$	9,050			$	3,730
Accounts receivable		5,900				3,900
Inventory		7,400				4,700
Prepaid rent		320				640
Plant and equipment		17,900				15,400
Less: Accumulated depreciation		(6,800	)			(6,200	)
Total assets	$	33,770			$	22,170
Liabilities and Shareholders’ Equity:
Accounts payable	$	4,800			$	2,800
Interest payable		270				0
Deferred service revenue		1,140				770
Income taxes payable		720				1,140
Loan payable (due 12/31/2020)		8,400				0
Common stock		11,700				11,700
Retained earnings		6,740				5,760
Total liabilities and shareholders' equity	$	33,770			$	22,170

Additional information for the 2018 fiscal year ($ in thousands):

Cash dividends of $2,700 were declared and paid.

Equipment costing $7,400 was purchased with cash.

Equipment with a book value of $2,200 (cost of $4,900 less accumulated depreciation of $2,700) was sold for $2,200.

Depreciation of $3,300 is included in operating expenses.

Required:
Prepare Santana Industries' 2018 statement of cash flows, using the indirect method to present cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
  

Answer 1

	Statement of Cash Flows
	For the Year Ended December 31, 2018
	($ in thousands)
Cash flows from operating activities
Net income	3680
Adjustments for noncash effects
Depreciation expense	3300
Changes in operating assets and liabilities
Increase in accounts receivable	-2000
Increase in inventory	-2700
Decrease in prepaid rent	320
Increase in Accounts payable	2000
Increase in Interest payable	270
Increase in deferred service revenue	370
Decrease in income taxes payable	-420
Net cash flows from operating activities		4820
Cash flows from investing activities
Purchase of equipment	-7400
Sale of equipment	2200
Net cash flows used in investing activities		-5200
Cash flows from financing activities
Proceeds from loan payable	8400
Payment of dividends	-2700
Net cash flows from financing activities		5700
Net increase in cash		5320
Cash, January 1		3730
Cash, December 31		9050