Question

Application Problem 5-6B a-b (Part Level Submission) Financial statement data for Metro Moving Company for 2020 follow. METRO MOVING COMPANY Comparative Statement of Financial Position Dec. 31, 2020 Dec. 31, 2019 Assets Cash $68,600 549.100 Accounts receivable 95,500 59.900 Prepaid insurance 29,500 19,500 Total current assets 193,600 128,500 Property, equipment, and vehicles 400,000 345,000 Accumulated depreciation (110,400) (105,900) Total non-current assets 289,600 239.100 Total assets $483,200 $367,600 Liabilities and shareholders' equity Accounts payable $21,500 $18,600 Wages payable 3,000 4,000 Total current liabilities 24,500 22,600 Bank loan 50,000 60,000 Total liabilities 74,500 82,600 Common shares 200,000 200,000 Retained earnings 208,700 85,000 Total shareholders' equity 408,700 285,000 Total liabilities and shareholders' equity $483,200 $367,600 METRO MOVING COMPANY Statement of Income For the year ended December 31, 2020 Moving revenue $450,700 Gain on sale of vehicles 4,000 454,700 Expenses Vehicle operating expenses $103,100 Wages expense 133,000 Depreciation expense 59,500 Interest expense 5,400 Total expenses 301,000 Net income $153,700 Additional information: 1. Vehicles that cost $65,000 and had a net carrying amount of $10,000 were sold for $14,000. 2. A cash payment was made to reduce the bank loan. 3. Dividends were declared and paid during the year. (a) Prepare a statement of cash flows for Metro Moving Company for the year ended December 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g.-15,000 or in parenthesis e.g. (15,000).) Metro Moving Company Statement of Cash Flows For the Year Ended December 31, 2020

Answer 1

Answer with T accounts is given below

For preparation of cash flow statement it is better if we prepare T accounts as we can find missing information easily

in the given case Vehicle purchase can only be found by preparing T accounts

Working notes: Property Equipment and Vehicle opening balance $345,000 Accumulated Depre $55,000 Bank Account Profit and Loss A/C $120,000 Bank $4,000 closing balance $14,000 $400,000 $469,000 $469,000 METRO MOVING COMPANY Statement of Cash flows For the year ended December 31, 2020 Cash flows from Operating Activities Amount Net Income $153,700 Add: Adjustments to reconcile net income to Net Income provided by Operating Activities Depreciation expense $59,500 Interest Expense $5,400 Gain on sale of Vehicle ($4,000) Increase in Accounts Receivable ($35,600) Increase in prepaid insurance ($10,000) Increase in Accounts payable $2,900 Decrease in wages payable ($1,000) Payment of Interest Expense ($5,400) Net Cash provided by Operating Activities $165,500 Cash flows from Investing Activities Cash payments to Equipment/Vehicle purchase ($120,000) Sale of Vehicle $14,000 Net Cash Used in Investing Activities ($106,000) Cash flows from Financing Activities Cash payments for Bank Loan ($10,000) Cash payments for Dividends ($30,000) Net Cash Provided by Financing Activities ($40,000) Net increase in cash during the year $19,500 Opening balance of cash $49,100 Closing balance of cash $68,600 Accumulated Depreciation- Property Equipment and vehicle Accumulated Depre $55,000 Opening Balance $105,900 P and L Account $59,500 Closing balance $110,400 (Depreciation during the year) $165,400 $165,400 Dividend paid Retained Earnings $30,000 Opening Balance P and L Account $208,700 (Net Income) $85,000 $153,700 Closing balance $238,700 $238,700