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

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$      104,950
Adjustments
Depreciation	$         80,000
Amortization	$         15,000
Change In current assets & Liabilities
Increase in Accounts Receivable	$       (31,000)
Increase in Inventories	$       (31,000)
Decrease in Prepaid Expenses	$           6,000
Decrease in Accounts payable	$       (28,000)
Decrease in Interest payable	$         (8,800)
Increase in Other Accruals	$           8,400
Decrease in Tax payable	$       (10,000)
Total Adjustments		$              600
Net Cash from operating activities			$      105,550
Cash flow from Investing Activities
Cash from sale of investments		$         24,000
Cash from Sale of land		$         39,000
Cash used for purchase of equipment		$     (201,000)
Cash used for purchase of patent		$       (15,000)
Net Cash used in investing activities			$    (153,000)
Cash flow from Financing Activities
Cash from Notes Payable		$         19,250
Cash from Mortgage Payable		$         22,000
Cash used for Bonds Payable		$       (83,000)
Cash from sale of common stock		$      125,000
Cash used for dividends		$       (59,300)
Net Cash from financing activities			$        23,950
Net Increase in cash			$      (23,500)
Cash, beginning of the year			$      131,500
Cash, ending of the year			$      108,000

Alternatively, sale of marketable securities can be skipped, and can be treated as cash and cash equivalents