Question

Use the following information for the Problems below.

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Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.

GOLDEN CORPORATION Comparative Balance Sheets December 31
	Current Year						Prior Year
Assets
Cash		$	174,000					$	118,000
Accounts receivable			98,000						81,000
Inventory			616,000						536,000
Total current assets			888,000						735,000
Equipment			361,900						309,000
Accum. depreciation—Equipment			(163,000	)					(109,000	)
Total assets		$	1,086,900					$	935,000
Liabilities and Equity
Accounts payable		$	107,000					$	81,000
Income taxes payable			38,000						30,100
Total current liabilities			145,000						111,100
Equity
Common stock, $2 par value			604,000						578,000
Paid-in capital in excess of par value, common stock			214,000						175,000
Retained earnings			123,900						70,900
Total liabilities and equity		$	1,086,900					$	935,000

  

GOLDEN CORPORATION Income Statement For Current Year Ended December 31
Sales				$	1,842,000
Cost of goods sold					1,096,000
Gross profit					746,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		504,000			558,000
Income before taxes					188,000
Income taxes expense					36,000
Net income				$	152,000

Additional Information on Current Year Transactions

1. Purchased equipment for $52,900 cash.
2. Issued 13,000 shares of common stock for $5 cash per share.
3. Declared and paid $99,000 in cash dividends.

Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.)

GOLDEN CORPORATION

Statement of Cash Flows

For Current Year Ended December 31

Cash flows from operating activities

Net income$152,000

Adjustments to reconcile net income to net cash provided by operations:

Depreciation expense54,000

Cash flows from investing activities

Cash flows from financing activities:

Net increase (decrease) in cash

Cash balance at December 31, prior year

Cash balance at December 31, current year

Answer 1

Solution:

GOLDEN CORPORATION
Statement of Cash Flows (Indirect Method)
For the Current Year Ended December 31
Cash flows from operating activities:
Net Income	$                 152,000
Adjustments to reconcile to operating cash flow
Depreciation expense	$                   54,000
Changes in operating assets and liabilities:
Increase in Account Receivables	$                 (17,000)
Increase in inventory	$                 (80,000)
Increase in accounts payable	$                   26,000
Increase in income taxes payable	$                     7,900
Net cash flows from operating activities		$ 142,900
Cash flow from investing activities:
Purchase of equipment	$                 (52,900)
Net cash flow from investing activities (B)		$        (52,900)
Cash flow from financing activities:
Issuance of common stock(13000*5)	$                   65,000
Dividend paid to shareholders	$                 (99,000)
Net Cash flow from financing activities (C )		$        (34,000)
Net increase(decrease) in cash		$          56,000
Cash, January 1(Given balance of Dec. 31,2020)		$        118,000
Cash, December 31 (Given balance of Dec. 31,2021)		$        174,000