Question

Presented below are the 2021 income statement and comparative balance sheets for Santana Industries.

SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2021 ($ in thousands)
Sales revenue	$	17,850
Service revenue		7,000
Total revenue				$	24,850
Operating expenses:
Cost of goods sold		9,000
Selling expense		4,200
General and administrative expense		3,300
Total operating expenses					16,500
Operating income					8,350
Interest expense					330
Income before income taxes					8,020
Income tax expense					3,400
Net income				$	4,620

Balance Sheet Information ($ in thousands)	Dec. 31, 2021				Dec. 31, 2020
Assets:
Cash	$	10,100			$	3,820
Accounts receivable		6,100				4,000
Inventory		7,600				4,800
Prepaid rent		330				660
Equipment		18,100				15,600
Less: Accumulated depreciation		(6,900	)			(6,300	)
Total assets	$	35,330			$	22,580
Liabilities and Shareholders’ Equity:
Accounts payable	$	5,000			$	2,900
Interest payable		280				0
Deferred revenue		1,160				780
Income taxes payable		730				1,160
Notes payable (due 12/31/2023)		8,600				0
Common stock		11,800				11,800
Retained earnings		7,760				5,940
Total liabilities and shareholders' equity	$	35,330			$	22,580

Additional information for the 2021 fiscal year ($ in thousands):

1. Cash dividends of $2,800 were declared and paid.
2. Equipment costing $7,600 was purchased with cash.
3. Equipment with a book value of $2,300 (cost of $5,100 less accumulated depreciation of $2,800) was sold for $2,300.
4. Depreciation of $3,400 is included in operating expenses.

Required:
Prepare Santana Industries' 2021 statement of cash flows, using the indirect method to present cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
  

Answer 1

Cash Flow Statement (Indirect Method)
Particulars	Amount	Amount
Net Income		$        4,620.00
Adjustments to reconcile net income to:
Net cash provided by operating activities
Depreciation	$        3,400.00
Increase in Accounts Receivable	$       (2,100.00)
Increase in Inventory	$       (2,800.00)
Decrease in Prepaid Rent	$           330.00
Increase in Deferred Revenue	$           380.00
Increase in Interest Payable	$           280.00
Increase in Accounts Payable	$        2,100.00
Decrease in Taxes Payable	$          (430.00)
Net Cash Generated		$        1,160.00
Net cash provided by operating activities	(A)	$        5,780.00
Cash Flows from Investing Activities
Purchase of Equipment	$       (7,600.00)
Sale of Equipment	$        2,300.00
Net cash provided by investing activities	(B)	$       (5,300.00)
Cash Flows from Financing Activities
Dividend Paid	$       (2,800.00)
Increase in Long term Notes Payable	$        8,600.00
Net cash provided by Financing activities	(C')	$        5,800.00
Net increase/decrease in cash	(A+B+C')	$        6,280.00
Add:Opening cash balance		$        3,820.00
Closing cash balance		$      10,100.00