Question

12 Saved Suppose the income statement for Goggle Company reports $70 of net income, after deducting depreciation of $35. The company bought equipment costing $60 and obtained a long-term bank loan for $60. The company's comparative balance sheet, at December 31, indicates the following: Required: 1. Calculate the change in each balance sheet account, and indicate whether each account relates to operating Investing, and/or financing activities (Decreases should be indicated with minus sign.) Previous Year 35 5 Current Year 205 Change Type Cash Accounts Receivable Inventory Equipment Accumulated Depreciation Total Wages Payable Long-Term Debt Contributed Capital Retained Earnings Total

Answer 1

(b) (Ь) - (а) (a) Previous Current 1) Change Type Year Year $35 $205 $170 Operating Activities $100 Operating Activities -$125 Operating Activities $60 Investing Activities $35 Operating Activities $170 Cash $75 $175 Accounts Recievable $260 $135 Inventory $500 $560 Equipment Accumulated Depreciation -$45 -$80 $995 $825 Total Wages Payable Long-Term Debt Contributed Capital $10 $50 $40 Operating Activities $60 Financing Activities $0 Financing Activities $70 Financing Activities $170 $445 $505 $10 $10 Retained Earnings $360 $430 $825 $995 Total

2) GOOGLE COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flow from Operating Activities: $92 [Given] Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Expense $35 -$100 $125 $40 [Non-cash expense and so added back (Ref: Accumulated depreciation)] [Working capital is increased and so negative] [Working capital is decreased and so positive] $100 [Working capital is decreased and so positive] $192 Increase in Receivables Decrease in Inventory Increase in Wages Payable Net Cash provided by operating activities Cash Flow from Investing Activities: $0 Net Cash used in investing activities Cash Flow from Financing Activities: Dividends declared & paid during the year -$22 -$22 Net Cash used in financing activities Net Increase in cash balance during the year $170 Add: Beginning cash balance Ending Cash Balance $35 $205

6) Healthy Reason: The cash flows are typical of a healthy company because net cash provided by operating activities is positive. Also, there are no cash used in investing activities as equipment was purchased using long-term note payable, which is a non-cash activity carried out during the year.