Question

Presented below is the 2018 income statement and comparative balance sheet information for Tiger Enterprises. TIGER ENTERPRISES Income Statement For the Year Ended December 31, 2018 ($ in thousands) Sales revenue $ 7,000 Operating expenses: Cost of goods sold $ 3,360 Depreciation 240 Insurance 100 Administrative and other 1,800 Total operating expenses 5,500 Income before income taxes 1,500 Income tax expense 600 Net income $ 900 Balance Sheet Information ($ in thousands) Dec. 31,2018 Dec. 31, 2017 Assets: Cash $ 300 $ 200 Accounts receivable 750 830 Inventory 640 600 Prepaid insurance 50 20 Plant and equipment 2,100 1,800 Less: Accumulated depreciation (840 ) (600 ) Total assets $ 3,000 $ 2,850 Liabilities and Shareholders' Equity: Accounts payable $ 300 $ 360 Payables for administrative and other expenses 300 400 Income taxes payable 200 150 Note payable (due 12/31/2019) 800 600 Common stock 900 800 Retained earnings 500 540 Total liabilities and shareholders' equity $ 3,000 $ 2,850 Required: Prepare Tiger’s statement of cash flows, using the indirect method to present cash flows from operating activities. (Hint: You will have to calculate dividend payments). (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Statement of Cash Flows using Indirect Method:
Cash Flow from Operating activities:
Net Income	900
Add:
Income tax expense	600
Depreciation	240
Cash Flow from operating activities before working capital adjustments and taxes		1740
Working Capital Adjustments:
Decrease in Accounts Receivable (830-750)	80
Increase in Inventory (640-600)	-40
Increase in Prepaid Insurance (50-20)	-30
Decrease in Accounts Payable (360-300)	-60
Decrease in Payable for Administrative and other expenses (400-300)	-100
Increase in Income Taxes Payable (200-150)	50
Cash Flow before taxes		1640
Less: Income tax expense	600
Net Cash Flow from Operating activities		1040
Cash Flow from Investing Activities:
Purchase of Plant & Equipment (2100-1800)	-300
Net Cash Flow from Investing activities		-300
Cash Flow from Financing Activities:
Issue of Common Stock (900-800)	100
Loan by way of Note (800-600)	200
Dividend Paid (900+540-500)	-940
Net Cash Flow from Financing Activities		-640
Net Cash Flow during the year		100
Opening Cash Balance		200
Ending Cash Balance		300