Question

Spiceland Intermediate Accounting,

Presented below are the 2018 income statement and comparative balance sheets for Santana Industries. SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in thousands)

Sales revenue $ 18,050

Service revenue 7,200

Total revenue $ 25,250

Operating expenses:

Cost of goods sold 9,100

Selling 4,300

General and administrative 3,400

Total operating expenses 16,800

Operating income 8,450

Interest expense 390

Income before income taxes 8,060

Income tax expense 4,400

Net income $ 3,660

Balance Sheet Information ($ in thousands) Dec. 31, 2018

Dec. 31, 2017 Assets:

Cash $ 9,250 $ 3,910

Accounts receivable 6,300 4,100

Inventory 7,800 4,900

Prepaid rent 340 680

Plant and equipment 18,300 15,800

Less: Accumulated depreciation (7,000 ) (6,400 )

Total assets $ 34,990 $ 22,990

Liabilities and Shareholders’ Equity:

Accounts payable $ 5,200 $ 3,000

Interest payable 290 0

Deferred service revenue 1,180 790

Income taxes payable 740 1,180

Loan payable (due 12/31/2020) 8,800 0

Common stock 11,900 11,900

Retained earnings 6,880 6,120

Total liabilities and shareholders' equity $ 34,990 $ 22,990

Additional information for the 2018 fiscal year ($ in thousands):

1. Cash dividends of $2,900 were declared and paid.

2. Equipment costing $7,800 was purchased with cash.

3. Equipment with a book value of $2,400 (cost of $5,300 less accumulated depreciation of $2,900) was sold for $2,400.

4. Depreciation of $3,500 is included in operating expenses.

Required: Prepare Santana Industries' 2018 statement of cash flows, using the indirect method to present cash flows from operating activities.

Answer 1

Prepare Santana Industries' 2018 statement of cash flows, using the indirect method to present cash flows from operating activities

Cash flow from operating activities
Net income	3660
Adjustment to reconcile net income
Depreciation expenses	3500
Increase account receivable	(2200)
Increase inventory	(2900)
Decrease prepaid rent	340
Increase account payable	2200
Increase interest payable	290
Increase deferred service revenue	390
Decrease income tax payable	(440)
Net cash flow from operating activities		4840
Cash flow from investing activities
Equipment purchased	(7800)
Equipment sold	2400
Net cash flow from investing activities		(5400)
cash flow from financing activities
Dividend paid	(2900)
Loan taken	8800
Net cash flow from financing activities		5900
Net cash flow		5340
Beginning cash		3910
Ending cash		9250