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Presented below are the 2018 income statement and comparative balance sheets for Santana Industries. SANTANA INDUSTRIES...

Presented below are the 2018 income statement and comparative balance sheets for Santana Industries.

SANTANA INDUSTRIES
Income Statement
For the Year Ended December 31, 2018
($ in thousands)
Sales revenue $ 14,450
Service revenue 3,600
Total revenue $ 18,050
Operating expenses:
Cost of goods sold 7,300
Selling 2,500
General and administrative 1,600
Total operating expenses 11,400
Operating income 6,650
Interest expense 210
Income before income taxes 6,440
Income tax expense 2,600
Net income $ 3,840
Balance Sheet Information ($ in thousands) Dec. 31,
2018
Dec. 31,
2017
Assets:
Cash $ 7,450 $ 2,290
Accounts receivable 2,700 2,300
Inventory 4,200 3,100
Prepaid rent 160 320
Plant and equipment 14,700 12,200
Less: Accumulated depreciation (5,200 ) (4,600 )
Total assets $ 24,010 $ 15,610
Liabilities and Shareholders’ Equity:
Accounts payable $ 1,600 $ 1,200
Interest payable 110 0
Deferred service revenue 820 610
Income taxes payable 560 820
Loan payable (due 12/31/2020) 5,200 0
Common stock 10,100 10,100
Retained earnings 5,620 2,880
Total liabilities and shareholders' equity $ 24,010 $ 15,610


Additional information for the 2018 fiscal year ($ in thousands):

Cash dividends of $1,100 were declared and paid.

Equipment costing $4,200 was purchased with cash.

Equipment with a book value of $600 (cost of $1,700 less accumulated depreciation of $1,100) was sold for $600.

Depreciation of $1,700 is included in operating expenses.


Required:
Prepare Santana Industries' 2018 statement of cash flows, using the indirect method to present cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
  

Solutions

Expert Solution

Santana Industries   

Statement of Cash Flows for year ended Dec 31, 2018 (Amounts in $)

Cash Flows from Operating Activities
Net Income 3,840
Adjustments to reconcile net income to operating cash flows
Add: Depreciation Expense 1,700
Less: Increase in Accounts Receivable ($2,700-$2,300) (400)
Less: Increase in Inventory ($4,200-$3,100) (1,100)
Add: Decrease in Prepaid rent ($320-$160) 160
Add: Increase in Accounts Payable ($1,600-$1,200) 400
Add: Increase in Interest Payable ($110-$0) 110
Add: Increase in Deferred Service Revenue ($820-$610) 210
Less: Decrease in Income taxes payable ($820-$560) (260)
Total Adjustments 820
Net cash provided by Operating Activities (A) 4,660
Cash Flows from Investing Activities
Purchase of Equipment (4,200)
Sale of Equipment 600
Net Cash used in Investing Activities (B) (3,600)
Cash Flows from Financing Activities
Dividends paid in cash (1,100)
Borrowing of long term loan 5,200
Net cash provided by Financing Activities (C) 4,100
Net Increase or (Decrease) in Cash (A+B+C) 5,160
Add: Beginning Cash Balance 2,290
Ending Cash Balance 7,450

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