Question

Exercise 4-20 (Algo) Statement of cash flows; indirect method [LO4-8]

Presented below is the 2021 income statement and comparative balance sheet information for Tiger Enterprises.

TIGER ENTERPRISES
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Sales revenue								$	9,000
Operating expenses:
Cost of goods sold		$	3,800
Depreciation expense			280
Insurance expense			300
General and administrative expense			2,200
Total operating expenses									6,580
Income before income taxes									2,420
Income tax expense									(968	)
Net income								$	1,452
Balance Sheet Information ($ in thousands)	Dec. 31,2021						Dec. 31, 2020
Assets:
Cash		$	380					$	240
Accounts receivable			770						870
Inventory			700						640
Prepaid insurance			90						40
Equipment			2,500						2,000
Less: Accumulated depreciation			(920	)					(640	)
Total assets		$	3,520					$	3,150
Liabilities and Shareholders' Equity:
Accounts payable		$	320					$	400
Accrued liabilities (for general & administrative expense)			320						440
Income taxes payable			220						190
Notes payable (due 12/31/2022)			1,040						800
Common stock			980						840
Retained earnings			640						480
Total liabilities and shareholders' equity		$	3,520					$	3,150

Required:
Prepare Tiger’s statement of cash flows, using the indirect method to present cash flows from operating activities. (Hint: You will have to calculate dividend payments). (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Solution

Tiger Enterprises
Cash Flow Statement
For the ended December 31, 2021
Cash Flow from Operating Activities:
Net Income		$          1,452.00
Add: Adjustments to reconcile net income to net cash from operating activities
Depreciation expense	$              280.00
Increase in prepaid insurance	$              (50.00)
Decrease in Accounts Payable	$              (80.00)
Decrease in Accounts receivables	$              100.00
Increase in Inventory	$              (60.00)
Increase in income tax payable	$                30.00
Decrease in other expenses payable	$            (120.00)
		$             100.00
A. Cash Flow from Operating Activities		$          1,552.00
Cash Flow from Investing Activities:
Purchase of Equipment	$            (500.00)
B. Cash flow from Investing Activities		$           (500.00)
Cash Flow from Financing Activities:
Issue of Common Stock	$              140.00
Dividend paid	$        (1,292.00)
Proceeds from notes payable	$              240.00
C. Cash Flow from Financing Activities		$           (912.00)
Increase (Decrease) in cash [A+B+C]		$             140.00
Cash January 1		$             240.00
Cash December 31		$             380.00

.

Calculation of dividend paid
Beginning balance of retained earnings	$             480.00
Add: Net income	$         1,452.00
	$         1,932.00
Less: Ending balance of Retained earnings	$             640.00
Dividends paid in cash	$         1,292.00