Question

Use the following information to prepa owing information to prepare a statement of cash flows for the current year using the indirect method, Exercise 12-12 Indirect: Preparing statement of cash flows P2 P3 MONTGOMERY INC. Comparative Balance Sheets Current Year Prior Year MONTGOMERY INC. Income Statement For Current Year Ended December 31 $45,575 (18,950) 26,625 At December 31 Assets Cash. Accounts receivable, net .. Inventory Total current assets Equipment Accum. depreciation-Equipment... Total assets.. Liabilities and Equity Accounts payable........ Salaries payable Total current liabilities $ 30,400 10.050 90.100 130.550 49,900 (22,500) $157,950 $ 30,550 12,150 70,150 112,850 41,500 (15.300) $139,050 Sales ....... Cost of goods sold Gross profit Operating expenses Depreciation expense.... Other expenses ......... Total operating expenses ... Income before taxes. Income tax expense.... Net income.... $7,200 5,550 12.750 13,875 3,375 $10,500 $ 23,900 500 24,400 $ 25,400 600 26,000 Equity Common stock, no par value....... Retained earnings. Total liabilities and equity.......... 110,000 23,550 $157,950 100,000 13.050 $139,050 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $10,000 cash. c. Purchased equipment for cash; no equipment was sold.

Answer 1

Correct Answer:

Montgomery Inc.
Statement of Cash Flows
A. Cash Flows from Operating Activity
Net Income		$            10,500
Adjustments to reconcile net income to net cash flows from Operating Activities
Income statement items not affecting cash
Depreciation expense	$                   7,200
Changes In Current Operating Assets Liabilities
decrease in Accounts Receivable	$                   2,100
increase in inventory	$              (19,950)
decrease in Accounts Payable	$                 (1,500)
decrease in salaries Payable	$                    (100)
Net cash flow from Operating activities		$          (12,250)
		$            (1,750)
B. Cash flows from Investing Activities
Purchase Of Equipment	$           (8,400.00)
Net Cash Used in Investing activities		$      (8,400.00)
C. Cash Flows from Financing activities
Issued common stock	$           10,000.00
Cash flows from Financing activities		$      10,000.00
Net Increase (Decrease) in Cash [A+B+C]		$          (150.00)
Cash at the beginning		$      30,550.00
Cash at the end		$      30,400.00

End of answer.

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