Question

Audio City, Inc. is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below:

	Current Year			Previous Year
Balance Sheet at December 31
Cash	$	82,500		$	84,800
Accounts Receivable		18,600			24,500
Inventory		27,400			24,500
Equipment		241,000			159,000
Accumulated Depreciation–Equipment		(73,500	)		(54,000	)
	$	296,000		$	238,800
Accounts Payable	$	8,900		$	20,800
Salaries and Wages Payable		2,000			1,000
Note Payable (long-term)		64,500			84,000
Common Stock		118,000			79,000
Retained Earnings		102,600			54,000
	$	296,000		$	238,800
Income Statement
Sales Revenue	$	227,000
Cost of Goods Sold		99,000
Other Expenses		73,500
Net Income	$	54,500

Additional Data:

a.	Bought equipment for cash, $82,000.
b.	Paid $19,500 on the long-term note payable.
c.	Issued new shares of stock for $39,000 cash.
d.	Dividends of $5,900 were paid in cash.
e.	Other expenses included depreciation, $19,500; salaries and wages, $24,500; taxes, $29,500.
f.	Accounts Payable includes only inventory purchases made on credit. Because a liability relating to taxes does not exist, assume that they were fully paid in cash.

Required:

1.	Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Audio City Statement of cash Flows For the year ended december 31
Net Income		54500
Adjustments to reconcile net income
Depriciation Expense 73500-54000	19500
Decrease in accounts receivable 24500-18600	5900
Increase in merchandise inventory -27400+24500	-2900
Decrease in accounts payable 8900-20800	-11900
Incease in wages payable 2000-1000	1000
Net cash provided by operating activity		11600
Cash flow from innvesting activities
Cash payments to purchase equipment	-82000
Net cash provided by used in ( investing activity)		-82000
Cash flow from Financing activities
Cash payments on long term note	-19500
Cash receipts from issusing stock	39000
cash dividend paid	-5900
Net cash provided by financing activities		13600
Net decrease in cash during the year		-2300
Beginning balance of cash jan 1		84800
Ending balance of cash dec 31		82500