Question

Sharp Screen Films, Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Current Year Prior Year Balance sheet at December 31 Cash $ 66,950 $ 66,200 Accounts receivable 19,750 25,950 Merchandise inventory 25,950 20,800 Property and equipment 214,150 152,800 Less: Accumulated depreciation (63,400 ) (47,950 ) $ 263,400 $ 217,800 Accounts payable $ 13,500 $ 23,800 Wages payable 5,400 6,000 Note payable, long-term 64,000 76,200 Common stock and additional paid-in capital 104,200 67,800 Retained earnings 76,300 44,000 $ 263,400 $ 217,800 Income statement for current year Sales $ 213,000 Cost of goods sold 110,000 Depreciation expense 15,450 Other expenses 44,800 Net income $ 42,750 Additional Data: Bought equipment for cash, $61,350. Paid $12,200 on the long-term note payable. Issued new shares of stock for $36,400 cash. Dividends of $10,450 were declared and paid. Other expenses all relate to wages. Accounts payable includes only inventory purchases made on credit.
Required:

1. Prepare the statement of cash flows using the indirect method for the year ended December 31, current year.

Answer 1

Answer:

Please see below for solution:

Explanation:

Mitch Company      

Statement of Cash Flow      

As of December 31, 2017      

     

CASH FLOWS FROM OPERATING ACTIVITIES     $

Net Income      42,750

Adjustments to reconcile net income to      

net cash provided by operating activities:      

Depreciation on Fixed Assets      15,450

(Increase) Decrease in Current Assets:      

Accounts Receivables      6,200  

Merchandise Inventory      (5,150)

Increase (Decrease) in Current Assets:      

Accounts Payable      (10,300)

Wages payable      (600)

NET CASH PROVIDED BY OPERATING ACTIVITIES   48,350  

     

CASH FLOWS FROM INVESTING ACTIVITIES      

Purchase of Property and equipment      (61,350)      

NET CASH USED IN INVESTING ACTIVITIES     (61,350)

     

CASH FLOWS FROM FINANCING ACTIVITIES      

Payment of Note Payable, Long Term      (12,200)

Payment of Cash Dividends      (10,450)

Issuance of Common Stock and additional paid-in capital  36,400  

NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES    13,750  

NET INCREASE (DECREASE) IN CASH     750  

Cash Balance, December 31 2016      66,200  

Cash Balance, December 31 2017      66,950