Question

ICE Drilling Inc.’s balance sheet information and income statement are as follows:

ICE Drilling Inc.
Income Statement
For Year Ended December 31, 2017
Sales				$	1,113,600
Cost of goods sold					570,000
Gross profit				$	543,600
Operating expenses:
Depreciation expense	$	52,000
Other expenses		307,760
Total operating expenses					359,760
Profit from operations					183,840
Loss on sale of equipment					13,480
Profit before taxes				$	170,360
Income taxes					29,160
Profit				$	141,200

ICE Drilling Inc.
Comparative Balance Sheet Information
	December 31
	2017			2016
Cash	$	130,680		$	181,640
Accounts receivable		155,600			121,160
Merchandise inventory		623,200			575,600
Prepaid expenses		12,140			24,000
Equipment		359,280			256,400
Accumulated depreciation		87,560			108,560
Accounts payable		189,500			243,240
Current notes payable		32,400			24,000
Notes payable		210,000			122,400
Common shares		460,800			360,000
Retained earnings		300,640			300,600

Additional information regarding ICE Drilling’s activities during 2017:
1. Loss on sale of equipment is $13,480.
2. Paid $72,280 to reduce a long-term note payable.
3. Equipment costing $115,000, with accumulated depreciation of $73,000, is sold for cash.
4. Equipment costing $217,880 is purchased by paying cash of $58,000 and signing a long-term note payable for the balance.
5. Borrowed $8,400 by signing a short-term note payable.
6. Issued 10,080 common shares for cash at $10 per share.
7. Declared and paid cash dividends of $141,160.

Required:
Prepare a statement of cash flows for 2017 that reports the cash inflows and outflows from operating activities according to the indirect method. (List any deduction in cash and cash outflows as negative amounts.)

	ICE DRILLING INC. Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities: Adjustments to reconcile profit to net cash inflows from operating activities: $0 Cash flows from investing activities: 0 Cash flows from financing activities: 0 $0

Answer 1

	notes payable purchased
	ending balance on 2017					210,000
	ending balance on 2016				122,200
	Redeemed during the year				-72,280	49,920
	notes payable for Equipment purchase					160,080
	Cash from sale of Equipment
	original cost					115,000
	less accumulated dep					-73,000
	book value					42,000
	less loss on sale					-13,480
	Cash from sale of Equipment					28,520
	Statement of cash flow
	Cash from operating activities
	net income for the year				141,200
	Adjustments to reconcile profit to
	cash flows from operating activities
	Depreciation expense				52,000
	loss on sale of Equipment				13,480
	increase in account receivable				-34440
	increase in merchandise inventory				-47600
	decrease in prepaid expense				11860
	Decrease in accounts payable				-53740
	Cash flow from operating activities					82,760
	Cash flow from investing activities
	cash from sale of Equipment				28,520
	Cash paid for purchase of Equipment				-58,000
	Cash used by investing activities					-29,480
	Cash flow from financing activity
	cash paid to reduce long term note				-72,280
	cash from short term note payable				8,400
	Cash from stock issue				100800
	Cash dividend				-141,160
	Cash used by financing activity				-104,240	-104,240
	Net decrease in cash					-50,960
	Cash at the beginning of the year					181,640
	Cash at year end					130,680