Question

Serial Problem Business Solutions (Indirect) LO P1, P2, P3

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data.
  

BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2018
Computer services revenue				$	24,307
Net sales					18,293
Total revenue					42,600
Cost of goods sold	$	14,852
Depreciation expense—Office equipment		390
Depreciation expense—Computer equipment		1,200
Wages expense		2,750
Insurance expense		535
Rent expense		2,475
Computer supplies expense		1,305
Advertising expense		510
Mileage expense		280
Repairs expense—Computer		920
Total expenses					25,217
Net income				$	17,383

BUSINESS SOLUTIONS
Comparative Balance Sheets
December 31, 2017, and March 31, 2018
	Mar. 31, 2018				Dec. 31, 2017
Assets
Cash	$	75,727			$	51,652
Accounts receivable		23,867				5,468
Inventory		614				0
Computer supplies		2,095				550
Prepaid insurance		1,060				1,615
Prepaid rent		785				785
Total current assets		104,148				60,070
Office equipment		7,200				7,200
Accumulated depreciation—Office equipment		(780	)			(390	)
Computer equipment		19,200				19,200
Accumulated depreciation—Computer equipment		(2,400	)			(1,200	)
Total assets	$	127,368			$	84,880
Liabilities and Equity
Accounts payable	$	0			$	1,110
Wages payable		925				510
Unearned computer service revenue		0				1,900
Total current liabilities		925				3,520
Equity
Common stock		105,000				73,000
Retained earnings		21,443				8,360
Total liabilities and equity	$	127,368			$	84,880

  
Required:
Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2018. Owner Santana Rey contributed $32,000 to the business in exchange for additional stock in the first quarter of 2018 and has received $4,300 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)
  

	BUSINESS SOLUTIONS Statement of Cash Flows (Indirect) For Quarter Ended March 31, 2018 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities $0 Cash flows from investing activities Net cash used in investing activities Cash flows from financing activities 0 $0 Cash balance at December 31, 2017 Cash balance at March 31, 2018 $0

Answer 1

Business solutions
Statement of cash flows (indirect)
For the quarter ended Mar 31 2018
Particulars	$	$
Net income		17383
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation [390+1200]		1590
Less:
Increase in accounts receivable [5468-23867]	-18399
Increase in inventory	-614
Increase in computer supplies[550-2095]	-1545
Decrease in accounts payable	-1110
Decrease in unearned service revenue	-1900	-23568
Add:
Decrease in prepaid insurance [1615-1060]	555
Increase in wages payable [925-510]	415	970
Cash used in operating activities		-3625
Cash flows from investing activities:		0
Cash flows from financing activities:
Proceeds from issuance of common stock	32000
Payment of cash dividend	-4300
cash flows from financing activities		27700
Net cash from the activities		24075
cash flows in the beginning		51652
cash flows at the end		75727