Question

Based on the following information, prepare the statement of cash flows using the indirect method.

                                                               New Guy Company

                                                                    Balance Sheet

                                                                  2019                          2018                 Change

Current assets:

Cash                                                     $108,000                 $131,500            ($23,500)

Accounts receivable                               102,000                     71,000               31,000

Inventory                                                101,000                     70,000               31,000

Marketable securities                                 4,000                     28,000              (24,000)

Prepaid expenses                                      20,000                     26,000                (6,000)

Long-term assets

Plant & equipment (net)                          296,000                   175,000             121,000

Land                                                          52,000                     91,000              (39,000)

Patent                                                        53,000                     53,000                  0

               

Total Assets                                             736,000                    645,500

Current liabilities:

Accounts payable                                     41,000                       69,000              (28,000)

Interest payable                                        13,200                       22,000               (8,800)

Other accruals                                          22,400                       14,000                 8,400                 

Tax payable                                               2,500                        12,500              (10,000)

Note payable                                            31,250                       12,000                19,250

Long-term liabilities

Mortgage payable                                     81,000                       59,000              22,000

Bond payable                                            77,000                     160,000             (83,000)

Stockholder's equity

Common stock                                         350,000                    250,000             100,000

Paid-in-capital                                           25,000                          0                    25,000

Retained earnings                                      92,650                     47,000                45,650

Total Liabilities and Equity                        736,000                    645,500

                                                  Income Statement

                                    For the Year Ended December 31, 2019

Revenues:

Sales     (All on credit)                                                        $1,020,000

Expenses:

Cost of goods sold                                                      540,050

Depreciation expense                                                   80,000

*Other operating expenses                                           182,000

Interest expense                                                            75,000

Tax expense                                                                  38,000

    Total expense                                                                         915,050

Net Income                                                                                 104,950

*(Includes $15,000 of amortization expense for patent and $20,000 of a lease expense, which is a fixed charge

Answer 1

NEW GUY COMPANY
Statement of Cash Flows
For the year ended December 31, 2019
Cash flows from Operating Activities	$	$
Net Income		104,950
Adjustments to reconcile net income to net cash provided by operations
Depreciation expense	80,000
Patent Amortization Expense	15,000
Change in operating current assets and liabilities other than cash
Increase in Accounts Receivable	-31,000
Increase in Inventory	-31,000
Decrease in Marketable Securities	24,000
Increase in Prepaid expenses	6,000
Decrease in Accounts Payable	-28,000
Decrease in Interest Payable	-8,800
Increase in other accruals	8,400
Increase in Note Payable	19,250
Decrease in Income Tax Payable	-10,000
		43,850
Net cash provided by Operating Activities		148,800
Cash Flows from Investing Activities
Purchase of Patent	-15,000
Sale of Land	39,000
Purchase of Equipment	-201,000
Net cash used in Investing Activities		-177,000
Cash Flows from Financing Activities
Proceeds from issuance of shares	125,000
Proceeds from Loan taken	22,000
Repayment of Bonds	-83,000
Payment of dividends	-59,300
Net cash flows from Financing Activities		4,700
Net increase in cash		-23,500
Beginning cash balance		131,500
Ending cash balance		108,000

Dividend = Op Retained Earnings + Income - Cl Retained Earnings
Patent purchase = End Patent Balance - Beg Patent Bal + Amortization
Equipment purchase = End Plant and Equipment Balance - Beg Plant and Equipment Bal + Depreciation