Question

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       $

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