Question

Statement of Cash Flows -- Troubleshooting Homework					Why doesn't this balance? Please fix it.
					(There are 7 mistakes.)
	End of	Beginning
Balance sheet	year	of year	Change		Income statement
Cash	76,000	42,000	34,000		Sales
Accounts receivable	116,000	107,000	9,000		Cost of goods sold
Inventory	88,000	94,000	(6,000)		Gross profit
Total current assets	280,000	243,000	37,000		Operating expenses
Equipment, at cost	280,000	210,000	70,000		Income from operations
Less: Accum. depreciation	(80,000)	(67,000)	(13,000)		Other income & (expense):
Net book value of equipment	200,000	143,000	57,000		Interest expense
Total assets	480,000	386,000	94,000		Interest income
					Loss on sale of equipment
Accounts payable	70,000	81,000	(11,000)		Total other income/(expense)
Interest payable	7,000	4,000	3,000		Income before taxes
Total current liabilities	77,000	85,000	(8,000)		Income tax expense
Notes payable	235,000	176,000	59,000		Net income
Total liabilities	312,000	261,000	51,000
Common stock	40,000	30,000	10,000
Additional paid-in capital	25,000	20,000	5,000
Retained earnings	103,000	75,000	28,000
Total S.H. equity	168,000	125,000	43,000
Total liabilities & equity	480,000	386,000	94,000
Additional information: Equipment that originally cost 15,000 with accumulated depreciation of 8,000
was sold during the year for cash. The company also had 75,000 of new borrowing during the year.
Depreciation expense is included as part of the amount for operating expenses in the income statement.
Statement of Cash Flows - Indirect Method
Cash Flow from Operating Activities:					Incorrect version	Correct amounts
Net income					30,000
Depreciation expense					13,000
Loss on sale of equipment					4,000
Change in accounts receivable					(9,000)
Change in inventory					6,000
Change in accounts payable					11,000
Change in interest payable					3,000
Net cash flow from operating activies					58,000
Cash Flow from Investing Activities:
Proceeds from the sale of equipment					11,000
Purchases of equipment					(77,000)
Net cash flow from investing activities					(66,000)
Cash Flow from Financing Activities:
Proceeds from issuance of long-term debt					75,000
Principal payments on long-term debt					(134,000)
Proceeds from issuance of common stock					10,000
Dividends paid					2,000
Net cash flow from financing activities					(47,000)
Net increase/(decrease) in cash					(55,000)
Cash at beginning of year					42,000
Cash at end of year					$      (13,000)

Answer 1