Question

Swifty Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

SWIFTY INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
		12/31/17			12/31/16
Cash		$6,100			$6,900
Accounts receivable		61,900			50,600
Short-term debt investments (available-for-sale)		34,700			18,100
Inventory		40,000			59,400
Prepaid rent		5,000			4,000
Equipment		152,800			128,900
Accumulated depreciation—equipment		(34,900	)		(25,100	)
Copyrights		46,100			50,400
Total assets		$311,700			$293,200
Accounts payable		$45,800			$40,100
Income taxes payable		3,900			6,000
Salaries and wages payable		8,100			4,000
Short-term loans payable		8,100			10,100
Long-term loans payable		59,900			69,400
Common stock, $10 par		100,000			100,000
Contributed capital, common stock		30,000			30,000
Retained earnings		55,900			33,600
Total liabilities & stockholders’ equity		$311,700			$293,200

SWIFTY INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue				$339,275
Cost of goods sold				174,600
Gross profit				164,675
Operating expenses				120,100
Operating income				44,575
Interest expense		$11,200
Gain on sale of equipment		2,000		9,200
Income before tax				35,375
Income tax expense				7,075
Net income				$28,300

Additional information:

1.		Dividends in the amount of $6,000 were declared and paid during 2017.
2.		Depreciation expense and amortization expense are included in operating expenses.
3.		No unrealized gains or losses have occurred on the investments during the year.
4.		Equipment that had a cost of $20,100 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the indirect method.

Answer 1

SWIFTY INC
STATEMENT OF CASH FLOWS (INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME		28,300
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED OPERATING ACTIVITIES:
DEPRECIATION EXPENSES – EQUIPMENT	23,870
AMORTIZATION EXPENSES(50,400-46,100)	4,300
GAIN N SALE OF EQUIPMENT	-2,000
INCREASE IN ACCOUNTS RECEIVABLE (61,900-50,600)	-11,300
INCREASE IN SHORT TERM DEBTS INVESTMENTS(AVAILABLE FOR SALE) (34,700- 18,100)	-16,600
DECREASE IN INVENTORY (40,000-59,400)	19,400
INCREASE IN PREPAID RENT (4,000 - 5,000)	-1,000
INCREASE IN ACCOUNTS PAYABLE (40,100-45,800)	5,700
DECREASE IN INOMCE TAX PAYABLE(6,000-3,900)	-2,100
INCREASE IN SALARIES $ WAGES PAYABLE(4,000-8,100)	4,100
DECREASE IN SHORTTERM NOTES PAYABLE(10,100-8,100)	-2,000	22,370
NET CASH USED FOR OPERATING ACTIVITIES		50,670
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH RECIVED FROM SALE OF EQUIPMENT	8,030
CASH PAID FOR PURCHASE OF EQUIPMENT	-44,000
NET CASH USED FOR INVESTING ACTIVITIES		-35,970
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH PAID FOR REPAYMNET OF LONG TERM LOANS (69,400-59,900)	-9,500
CASH DIVIDENDS PAID	-6,000
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:		-15,500
NET INCREASE (DECREASE) IN CASH		-800
CASH BALANCE , DECEMBER 31, PRIOR YEAR		6,900
CASH BALANCE , DECEMBER 31, CURRENT YEAR		6,100

WORKNG NOTES:

ACCUMULATED DEPRECIATION
PARTCUARS	DEBIT	PARTCUARS	CREDIT
TO EQUIPMENT (20,100 *70%)	14070	BEGINNING BALANCE	25,100
TO CLOSING BALANCE	34,900	BY PROFIT & LOSS (B.F)	23,870
	48970		48,970

EQUIPMENT
PARTCUARS	DEBIT	PARTCUARS	CREDIT
BEGINNING BALANCE	128,900	ACCUMULATED DEPRECIATION	14,070
TO GAIN ON SALE OF EQUIPMENT	2,000	BY CASH RECEIVED ON SALE	8,030
TO CASH PURCHASE (B.F)	44,000	BY CLOSING BALANCE	152,800
	174,900		174,900