Question

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.

Additional Information on Current Year Transactions

a. Purchased equipment for $46,100 cash.

b. Issued 12,600 shares of common stock for $5 cash per share.

c. Declared and paid $95,000 in cash dividends.

Required:

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.)

Answer 1

1 Indirect Method $145,600 Golden Corporation Statement of Cash Flows For Current Year Ended December 31 Operating Activities Net Income Add: Adjustments to reconcile net income to net cash provided by Operating activities Depreciation Expense Changes in Working Capital Increase in Accounts Receivable Increase in Inventory Increase in Accounts Payable Increase in Income taxes payable Cash flow from Operating Activities $54,000 -$15,000 -$78,000 $22,000 $5,900 $134,500A Investing Activities Purchase of Equipment Cash flow used in Investing Activities -$46,100 -$46,100B Financing Activities Issued Common Stock Dividend paid Cash flow used in Financing Activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $63,000 -$95,000 -$32,000C $56,400 A+B+C $113,600 $170,000 2 Spreadsheet using Indirect Method Golden Corporation Spreadsheet for Statement of Cash Flows For the Current year Ended December 31 Analysis of Changes December 31, December 31, Debit Credit Prior Year Current Year Balance Sheet- Debit Balance Accounts Cash $113,600 $170,000 Accounts Receivable $77,000 $15,000 $92,000 Inventory $532,000 $78,000 $610,000 Equipment $305,000 $46,100 $351,100 $1,027,600 $1,223,100 Balance Sheet-Credit Balance Accounts Accumulated Depreciation- Equipment $107,000 $54,000 $161,000 Accounts payable $77,000 $22,000 $99,000 Income taxes payable $28,100 $5,900 $34,000 Common Stock $2 par value $574,000 $25,200 $599,200 Paid in Capital in excess of par value $169,000 $37,800 $206,800 Retained Earnings $72,500 $95,000 $145,600 $123,100 $1,027,600 $1,223,100 Golden Corporation Statement of Cash Flows For Current Year Ended December 31 Operating Activities Net Income Depreciation Expense Increase in Accounts Receivable Increase in Inventory Increase in Accounts Payable Increase in Income taxes payable Cash flow from Operating Activities $145,600 $54,000 -$15,000 -$78,000 $22,000 $5,900 $134,500 A Investing Activities Purchase of Equipment Cash flow used in Investing Activities -$46,100 -$46,100 B Financing Activities Issued Common Stock Dividend paid Cash flow used in Financing Activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $63,000 $95,000 -$32,000 C $56,400 A+B+C $113,600 $170,000 3 Direct Method Golden Corporation Statement of Cash Flows For Current Year Ended December 31 Operating Activities Cash received from customers Cash paid for suppliers Cash paid for expenses Cash paid for income taxes Cash flow from Operating Activities $1,807,000 -$1,148,000 -$500,000 -$24,500 $134,500A Investing Activities Purchase of Equipment Cash flow used in Investing Activities -$46,100 -$46,100 B Financing Activities Issued Common Stock Dividend paid Cash flow used in Financing Activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $63,000 -$95,000 -$32,000C $56,400 A+B+C $113,600 $170,000 Working notes: A Cash received from customers Sales Less: Increase in Accounts receivable Net cash received from customers $1,822,000 -$15,000 $1,807,000 B Cash paid to suppliers Cost of Goods sold Add: Increase in inventory cost of purchase $1,092,000 $78,000 $1,170,000 cost of purchase Less: Increase in payable Net payment to suppliers $1,170,000 $22,000 $1,148,000 C Cash Paid for expenses Other expenses Cash paid for other expenses $500,000 $500,000 D Cash paid for Income tax Income tax Less: increase in income tax payable cash paid for income tax $30,400 -$5,900 $24,500