Question

QS 12-19 Indirect: Preparing statement of cash flows LO P1, P2, P3

MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017
		2018				2017
Assets
Cash	$	78,500			$	78,600
Accounts receivable, net		16,700				20,400
Inventory		149,700				117,900
Total current assets		244,900				216,900
Equipment		82,900				69,800
Accum. depreciation—Equipment		(37,500	)			(25,700	)
Total assets	$	290,300			$	261,000
Liabilities and Equity
Accounts payable	$	39,900			$	42,700
Salaries payable		700				1,000
Total current liabilities		40,600				43,700
Equity
Common stock, no par value		210,200				195,500
Retained earnings		39,500				21,800
Total liabilities and equity	$	290,300			$	261,000

MONTGOMERY INC. Income Statement For Year Ended December 31, 2018
Sales				$	76,100
Cost of goods sold					(31,600	)
Gross profit					44,500
Operating expenses
Depreciation expense	$	11,800
Other expenses		9,400
Total operating expense					21,200
Income before taxes					23,300
Income tax expense					5,600
Net income				$	17,700

Additional Information

1. No dividends are declared or paid in 2018.
2. Issued additional stock for $14,700 cash in 2018.
3. Purchased equipment for cash in 2018; no equipment was sold in 2018.

1. Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2018, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
  

Answer 1

Answer-

MONTGOMERY INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31, 2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		17700
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		11800
Change in operating assets & liabilities
Decrease in accounts receivable		3700
Increase in inventory		-31800
Decrease in accounts payable		-2800
Decrease in salaries payable		-300
Net cash flow from operating activities (a)		-1700
Cash Flow from Investing activities
New equipment purchased	($82900-$69800)	-13100
Net cash Flow from Investing activities (b)		-13100
Cash Flow from Financing activities
Common stock issued		14700
Net cash Flow from Financing activities (c)		14700
Net Change in cash c=a+b+c		-100
Beginning cash balance		78600
Closing cash balance		78500