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Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her...

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, 2020
Computer services revenue $ 25,107
Net sales 18,293
Total revenue 43,400
Cost of goods sold $ 14,752
Depreciation expense—Office equipment 340
Depreciation expense—Computer equipment 1,220
Wages expense 2,250
Insurance expense 545
Rent expense 1,675
Computer supplies expense 1,285
Advertising expense 600
Mileage expense 230
Repairs expense—Computer 860
Total expenses 23,757
Net income $ 19,643
BUSINESS SOLUTIONS
Comparative Balance Sheets
December 31, 2019, and March 31, 2020
Mar. 31, 2020 Dec. 31, 2019
Assets
Cash $ 83,327 $ 58,062
Accounts receivable 24,267 5,568
Inventory 614 0
Computer supplies 2,035 490
Prepaid insurance 1,070 1,615
Prepaid rent 755 755
Total current assets 112,068 66,490
Office equipment 7,900 7,900
Accumulated depreciation—Office equipment (680 ) (340 )
Computer equipment 19,800 19,800
Accumulated depreciation—Computer equipment (2,440 ) (1,220 )
Total assets $ 136,648 $ 92,630
Liabilities and Equity
Accounts payable $ 0 $ 1,180
Wages payable 945 590
Unearned computer service revenue 0 1,800
Total current liabilities 945 3,570
Equity
Common stock 112,000 81,000
Retained earnings 23,703 8,060
Total liabilities and equity $ 136,648 $ 92,630


Required:
Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2020. Owner Santana Rey contributed $31,000 to the business in exchange for additional stock in the first quarter of 2020 and has received $4,000 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

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Expert Solution

Solution

BUSINESS SOLUTIONS
Statement of Cash Flows
For year Ended December 31 2020
A. Cash Flows from Operating Activity
Net Income $       19,643.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $         1,560.00
Changes in current operating assets and liabilities:
Increase in accounts receivable $    (18,699.00)
Decrease in Accounts Payable $      (1,180.00)
Decrease in Inventory $          (614.00)
Increase in computer supplies $      (1,545.00)
Decrease in prepaid insurance $            545.00
Increase in wages payable $            355.00
Decrease in Unearned computer service revenue $      (1,800.00)
$     (21,378.00)
Net cash flow from Operating activities $       (1,735.00)
B. Cash flows from Investing Activities
Net Cash flows from Investing activities $                       -  
C. Cash Flows from Financing activities
Issue of Common stock $      31,000.00
Dividends paid $      (4,000.00)
Cash flows from Financing activities $       27,000.00
Net Increase (Decrease) in Cash [A+B+C] $       25,265.00
Cash at the beginning $       58,062.00
Cash at the end $       83,327.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.


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