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Exercise 4-20 (Static) Statement of cash flows; indirect method [LO4-8] Presented below is the 2021 income...

Exercise 4-20 (Static) Statement of cash flows; indirect method [LO4-8]

Presented below is the 2021 income statement and comparative balance sheet information for Tiger Enterprises.

TIGER ENTERPRISES
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Sales revenue $ 7,000
Operating expenses:
Cost of goods sold $ 3,360
Depreciation expense 240
Insurance expense 100
General and administrative expense 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. 31,2021 Dec. 31, 2020
Assets:
Cash $ 300 $ 200
Accounts receivable 750 830
Inventory 640 600
Prepaid insurance 50 20
Equipment 2,100 1,800
Less: Accumulated depreciation (840 ) (600 )
Total assets $ 3,000 $ 2,850
Liabilities and Shareholders' Equity:
Accounts payable $ 300 $ 360
Accrued liabilities (for general & administrative expense) 300 400
Income taxes payable 200 150
Notes payable (due 12/31/2022) 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.)

Statement of Cash Flows
For the Year Ended December 31, 2021
($ in thousands)
Cash flows from operating activities:      
Net income      
Adjustments for noncash effects:      
Depreciation expense      
Changes in operating assets and liabilities:      
Decrease in accounts receivable      
Increase in inventory      
Increase in prepaid insurance      
Decrease in accounts payable      
Decrease in accrued liabilities      
Increase in income taxes payable      
Net cash flows from operating activities       $0
Cash flows from investing activities:      
Purchase of equipment      
Net cash flows from investing activities       0
Cash flows from financing activities:      
Dividends paid to shareholders      
Net cash flows from financing activities       0
Net increase in cash       0
Cash, January 1      
Cash, December 31       $

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Answer #1

Solution

Tiger Enterprises
Cash Flow Statement  
For the ended December 31, 2021
Cash Flow from Operating Activities:
Net Income $             900.00
Add: Adjustments to reconcile net income to net cash from operating activities
Depreciation expense $              240.00
Increase in prepaid insurance $              (30.00)
Decrease in Accounts Payable $              (60.00)
Decrease in Accounts receivables $                80.00
Increase in Inventory $              (40.00)
Increase in income tax payable $                50.00
Decrease in other expenses payable $            (100.00)
$             140.00
A. Cash Flow from Operating Activities $          1,040.00
Cash Flow from Investing Activities:
Purchase of Equipment $            (300.00)
B. Cash flow from Investing Activities $           (300.00)
Cash Flow from Financing Activities:
Issue of Common Stock $              100.00
Dividend paid $            (940.00)
Proceeds from notes payable $              200.00
C. Cash Flow from Financing Activities $           (640.00)
Increase (Decrease) in cash [A+B+C] $             100.00
Cash January 1 $             200.00
Cash December 31 $             300.00
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