Question

LAG Network Inc.'s balance sheet and income statement are as follows: LAG Network Inc. Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold $927,600 555,200 $372,400 Gross profit Operating expenses: Depreciation expense Other expenses $ 25,200 229,800 Total operating expenses 255,000 Profit from operations Income taxes $117,400 17,600 Profit $ 99,800 LAG Network Inc. Comparative Balance Sheet Information December 31 Assets 2017 2016 Cash $ 81,180 $ 54,200 Accounts receivable 41,400 37,400 Merchandise inventory 287,220 246,400 Equipment 153,400 138,200 Accumulated depreciation (70,800) (45,600) Total assets $492,400 $430,600 Liabilities and Equity Accounts payable Income taxes payable Common shares Retained earnings $ 30,200 10,600 362,000 89,600 $ 42,800 9,200 339,000 39,600 Total liabilities and equity $492,400 $430,600

Answer 1

Solution

LAG NETWORK INC
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net income		$   99,800.00
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	$   25,200.00
Increase in accounts receivables	$    (4,000.00)
Increase in inventory	$ (40,820.00)
Decrease in accounts payable	$ (12,600.00)
Increase in income tax payable	$     1,400.00
		$ (30,820.00)
Net cash from Operating Activities		$   68,980.00
Cash flows from investing activities:
Purchase of equipment	$ (15,200.00)
Net cash from Investing Activities		$ (15,200.00)
Cash flows from financing activities:
Dividends paid	$ (49,800.00)
Issue of shares	$   23,000.00
Net cash from Financing Activities		$ (26,800.00)
Net change in cash during the year		$   26,980.00
Add: Beginning cash balance		$   54,200.00
Ending cash balance		$   81,180.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.