Question

PA12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-3, LO 12-4, LO 12-5] XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:     Current Year Previous Year Balance Sheet at December 31             Cash $ 35,370   $ 30,450   Accounts Receivable   36,600     28,800   Inventory   42,600     38,800   Equipment   133,000     108,000   Accumulated Depreciation—Equipment   (31,600 )   (25,800 ) Total Assets $ 215,970   $ 180,250   Accounts Payable $ 37,600   $ 27,800   Salaries and Wages Payable   970     1,250   Note Payable (long-term)   45,200     52,000   Common Stock   93,400     73,400   Retained Earnings   38,800     25,800   Total Liabilities and Stockholders’ Equity $ 215,970   $ 180,250   Income Statement             Sales Revenue $ 128,000         Cost of Goods Sold   74,000         Other Expenses   41,000         Net Income $ 13,000           Additional Data: Bought equipment for cash, $25,000. Paid $6,800 on the long-term note payable. Issued new shares of stock for $20,000 cash. No dividends were declared or paid. Other expenses included depreciation, $5,800; salaries and wages, $20,800; taxes, $6,800; utilities, $7,600. Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.   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 with a minus sign.)

Answer 1

XS SUPPLY COMPANY
Cash Flow Statement
For the ended December 31
Cash Flow from Operating Activities:
Net Income		$             13,000.00
Add: Adjustments
Depreciation expense	$       5,800.00
Increase in Accounts Payables	$       9,800.00
Increase in Accounts receivables	$    (7,800.00)
Decrease in Inventory	$    (3,800.00)
Decrease in salaries and wages payable	$        (280.00)
		$               3,720.00
A. Cash Flow from Operating Activities		$             16,720.00
Cash Flow from Investing Activities:
Purchase of Equipment	$ (25,000.00)
B. Cash flow from Investing Activities		$          (25,000.00)
Cash Flow from Financing Activities:
Issue of Common Stock	$    20,000.00
Retirement of long term notes payable	$    (6,800.00)
C. Cash Flow from Financing Activities		$             13,200.00
Increase (Decrease) in cash [A+B+C]		$               4,920.00
Add: cash at the beginning of the year		$             30,450.00
Cash at the end of the year		$             35,370.00