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4 years ago

MONTGOMERY INC.

Business

1 answer:

Katarina [22]4 years ago

7 0

Answer:

Montgomery Inc.

Statement of Cash Flow, using the indirect method:

Net income $ 8,900

adjusting non-cash expense:

Depreciation 6,100

Net Cash from operations $15,000

Add: Working Capital:

Accounts receivable (2,000)

Inventory (16,800)

Accounts Payable (1,700)

Salaries payable (100)

Cash from operating activities ($5,600)

Investing Activities:

Purchase of Equipment (6,900)

Financing Activities:

Issue of additional stock 8,300

Net cash flow $4,200

Explanation:

MONTGOMERY INC. Comparative Balance Sheets

December 31

Current Year Prior Year

Assets

Cash $ 30,800 $ 31,000

Accounts receivable, net 8,900 10,900

Inventory 79,800 63,000

Total current assets 119,500 104,900

Equipment 44,200 37,300

Accum. depreciation: Equipment (19,900) (13,800)

Total assets $ 143,800 $ 128,400

Liabilities and Equity

Accounts payable $ 21,200 $ 22,900

Salaries payable 400 500

Total current liabilities 21,600 23,400

Equity

Common stock, no par value 102,400 94,100

Retained earnings 19,800 10,900

Total liabilities and equity $ 143,800 $ 128,400

MONTGOMERY INC.

Income Statement

For Current Year Ended December 31

Sales $ 38,500

Cost of goods sold (16,000)

Gross profit 22,500

Operating expenses

Depreciation expense $ 6,100

Other expenses 4,700

Total operating expense 10,800

Income before taxes 11,700

Income tax expense 2,800

Net income $ 8,900

b) The indirect method of preparing the statement of cash flows starts with the net income and uses the balances in the balance sheet to determine if they are net cash outflows or inflows.

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b. Advertising Expense: Yes it is closed to income summary account.

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e. Merchandise Inventory : Yes it is closed to income summary account

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