Question

P12-1 (Algo) Preparing a Statement of Cash Flows (Indirect Method) LO12-1, 12-2, 12-4, 12-6 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 $ 66,650 $ 65,900 Accounts receivable 19,150 25,750 Merchandise inventory 25,750 20,300 Property and equipment 213,450 152,500 Less: Accumulated depreciation (62,700 ) (47,750 ) $ 262,300 $ 216,700 Accounts payable $ 13,100 $ 23,200 Wages payable 5,200 5,700 Note payable, long-term 63,300 76,000 Common stock and additional paid-in capital 103,900 67,500 Retained earnings 76,800 44,300 $ 262,300 $ 216,700 Income statement for current year Sales $ 211,000 Cost of goods sold 108,000 Depreciation expense 14,950 Other expenses 44,600 Net income $ 43,450 Additional Data: Bought equipment for cash, $60,950. Paid $12,700 on the long-term note payable. Issued new shares of stock for $36,400 cash. Dividends of $10,950 were declared and paid. Other expenses all relate to wages. Accounts payable includes only inventory purchases made on credit.
Prepare the statement of cash flows using the indirect method for the year ended December 31, current year. (List cash outflows as negative amounts.)

Answer 1

Answer:

Explanation:

Sharp Screen Films, Inc.

Statement of Cash Flows

For the Year Ended December 31, Current year

Cash flows from operating activities:

Net income $ 44,550.00

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense $ 14,450.00

Decease in accounts receivables $ 6,500.00

Increase in Inventory $ (5,350.00)

Decrease in accounts payable $ (10,200.00)

Decrease in wages payable $ (500.00)

$ 4,900.00

Net cash from Operating Activities $ 49,450.00

Cash flows from investing activities:

Purchase of Equipment $ (58,450.00)

Net cash from Investing Activities $ (58,450.00)

Cash flows from financing activities:

Repayment of notes payable $ (12,000.00)

Issue of Common stock $ 34,900.00

Dividends paid $ (12,050.00)

Net cash from Financing Activities $ 10,850.00

Net change in cash during the year $ 1,850.00

Add: Beginning cash balance $ 65,400.00

Ending cash balance $ 66,650.00