Question

Bridgeport Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

BRIDGEPORT INC. Comparative Statement of Financial Position December 31
			2020			2019
Cash			$47,670			$25,040
Accounts receivable			57,990			51,030
Inventory			40,030			60,090
Prepaid rent			5,160			4,010
Equipment			163,130			130,080
Accumulated depreciation–equipment			(35,160	)		(25,010	)
Goodwill			24,000			64,000
	Total assets		$302,820			$309,240
Accounts payable			$46,130			$40,080
Income tax payable			4,030			6,090
Salaries and wages payable			8,040			4,040
Short–term loans payable			7,990			10,030
Long–term loans payable			64,000			83,000
Common shares			130,000			130,000
Retained earnings			42,630			36,000
	Total liabilities and shareholders’ equity		$302,820			309,240

BRIDGEPORT INC. Income Statement Year Ending December 31, 2020
Sales revenue					$348,425
Cost of goods sold					165,000
Gross margin					183,425
Operating expenses					120,000
Operating income					63,425
Interest expense		$12,100
Impairment loss–goodwill		40,000
Gain on disposal of equipment		(2,500	)		49,600
Income before income tax					13,825
Income tax expense					4,195
Net income					$9,630

Additional information:

1.		Dividends on common shares in the amount of $3,000 were declared and paid during 2020.
2.		Depreciation expense is included in operating expenses, as is salaries and wages expense of $75,000.
3.		Equipment with a cost of $28,000 that was 70% depreciated was sold during 2020.

Prepare a statement of cash flows FOR YEAR END DECEMBER 31,2020 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

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$           9,630
Adjustments
Depreciation	$         29,750
Impairement Loss	$         40,000
Gain on disposal of equipment	$         (2,500)
Change In current assets & Liabilities
Increase in Accounts Receivable	$         (6,960)			=51030-57990
Decrease in Inventories	$         20,060			=60090-40030
Increase in Prepaid Rent	$         (1,150)			=4010-5160
Increase in Accounts payable	$           6,050			=46130-40080
Decrease in Income Tax payable	$         (2,060)			=4030-6090
Increase in Salaries & Wages payable	$           4,000			=8040-4040
Total Adjustments		$         87,190
Net Cash from operating activities			$        96,820
Cash flow from Investing Activities
Purchase of Equipment		$       (61,050)		=130080-28000-163130
Sale of Equipment		$         10,900		=28000*30%+2500
Net Cash used in investing activities			$      (50,150)
Cash flow from Financing Activities
Repayment of Loan Payable		$       (21,040)		=7990+64000-10030-83000
Payment of cash dividends		$         (3,000)
Net Cash used in financing activities			$      (24,040)
Net Increase in cash			$        22,630
Cash, beginning of the year			$         25,040
Cash, ending of the year			$         47,670

Depreciation on Equipment sold = $28000 x 70% = $19600
Depreciation Expense for the year = $35160-25010+19600 = $29750