Question

Computer Service and Repair was started five years ago by two college roommates. The company’s comparative balance sheets and income statement are presented below, along with additional information. Current Year Prior Year Balance Sheet at December 31 Cash $ 6,765 $ 8,815 Accounts receivable 1,150 590 Prepaid expenses 550 95 Equipment 530 0 Accumulated depreciation (95 ) 0 $ 8,900 $ 9,500 Wages payable $ 440 $ 1,550 Short-term note payable 255 0 Common stock 2,800 2,800 Retained earnings 5,405 5,150 $ 8,900 $ 9,500 Income Statement for Current Year Service revenue $ 43,000 Depreciation expense 95 Salaries expense 34,500 Other expenses 8,150 Net income $ 255 Additional Data: a. Prepaid expenses relate to rent paid in advance. b. Other expenses were paid in cash. c. Purchased equipment for $530 cash at the beginning of the current year and recorded $95 of depreciation expense at the end of the current year. d. At the end of the current year, the company signed a short-term note payable to the bank for $255. Required: Prepare the statement of cash flows for the year ended December 31, current year, using the indirect method. (List cash outflows as negative amounts.)

Answer 1

Answer:

Explanation:

Cash Flow Statement For the year ended December 31, Current Year:

Particulars                                                     Amount

Cash Flow from Operating Activities  

Net income                                                                  255

Add: Non-cash Charges  

Depreciation expense                                                   95

Less: Increase in W.Capital  

Accounts receivable                                                -560

Prepaid expenses                                                        -455

Wages payable                                                        -1110

Short-term note payable                                         255

Net Cash used in Operating Activities                       -1520

Cash Flow from Investing Activities  

Purchase of equipment                                               -530

Net Cash used in Investing Activities  

Cash Flow from Investing Activities NIL

Net cash Used during the year                              -2050

Opening cash and cash equivalent                        8815

Closing cash and cash equivalent                       6765