Question

Monty Inc., a greeting card company, had the following statements prepared as of December 31, 2017. MONTY INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016 12/31/17 12/31/16 Cash $5,900 $7,000 Accounts receivable 62,500 51,200 Short-term debt investments (available-for-sale) 35,300 17,900 Inventory 39,800 60,100 Prepaid rent 5,100 3,900 Equipment 155,200 130,400 Accumulated depreciation—equipment (34,700 ) (25,200 ) Copyrights 45,500 50,400 Total assets $314,600 $295,700 Accounts payable $46,100 $39,900 Income taxes payable 4,100 6,000 Salaries and wages payable 8,000 4,000 Short-term loans payable 8,000 10,100 Long-term loans payable 60,400 69,100 Common stock, $10 par 100,000 100,000 Contributed capital, common stock 30,000 30,000 Retained earnings 58,000 36,600 Total liabilities & stockholders’ equity $314,600 $295,700 MONTY INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017 Sales revenue $340,650 Cost of goods sold 175,900 Gross profit 164,750 Operating expenses 121,000 Operating income 43,750 Interest expense $11,500 Gain on sale of equipment 2,000 9,500 Income before tax 34,250 Income tax expense 6,850 Net income $27,400 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 $20,200 and was 70% depreciated was sold during 2017. Prepare a statement of cash flows 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

MONTY INC
Statement of Cashflows
For the year Ended December 31, 2017
Cash flows from operating activities
Net Income		$27,400.00
Adjustments to reconcile net income to :
Depreciation expense	$23,640.00		34700-25200+(20200*70%)
Amortization expense	$4,900.00		50400-45500
Gain on sale of equipment	-$2,000.00
Increase in accounts receivable	-$11,300.00
Decrease in inventory	$20,300.00
Increase in prepaid rent	-$1,200.00
Increase in accounts payable	$6,200.00
Decrease in income tax payable	-$1,900.00
Increase in salaries and wages payable	$4,000.00
		$42,640.00
Net cash flow from operating activities		$70,040.00
Cash flows from investing activities
Cash received from sale of equipment	$8,060.00		(20200*30%)+2000
Cash paid for Purchase of equipment	-$45,000.00		130400-155200-20200
Cash paid for acquisition of short term investment	-$17,400.00
Net cash used by investing activities		-$54,340.00
Cash flows from financing activities
Cash paid for dividend	-$6,000.00
Repayment of short term loans payable	-$2,100.00
Repayment of long term loan payable	-$8,700.00
Net cash flow used by financing activities		-$16,800.00
Net increase in cash and cash equivalents		-$1,100.00
Cash and cash equivalents at beginning of period		$7,000.00
Cash and cash equivalents at end of period		$5,900.00