Question

XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

	Current Year			Previous Year
Balance Sheet at December 31
Cash	$	31,850		$	26,750
Accounts Receivable		33,000			27,000
Inventory		39,000			37,000
Equipment		106,000			90,000
Accumulated Depreciation—Equipment		(28,000	)		(24,000	)
Total Assets	$	181,850		$	156,750
Accounts Payable	$	34,000		$	26,000
Salaries and Wages Payable		1,050			1,150
Note Payable (long-term)		29,000			34,000
Common Stock		82,600			71,600
Retained Earnings		35,200			24,000
Total Liabilities and Stockholders’ Equity	$	181,850		$	156,750
Income Statement
Sales Revenue	$	110,000
Cost of Goods Sold		65,000
Other Expenses		33,800
Net Income	$	11,200

Additional Data:

1. Bought equipment for cash, $16,000.
2. Paid $5,000 on the long-term note payable.
3. Issued new shares of stock for $11,000 cash.
4. No dividends were declared or paid.
5. Other expenses included depreciation, $4,000; salaries and wages, $19,000; taxes, $5,000; utilities, $5,800.
6. Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

XS SUPPLY COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Cash Flows from Investing Activities: Cash Flows from Financing Activities:

Answer 1

XS SUPPLY COMPANY
Statement of Cash Flows
For the Year Ended December 31
S.No.	Cash Flows from Operating Activities:
	Net Income		$11,200
	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
	Depreciation	$4,000
	Increase in Accounts Receivables	-$6,000
	Increase in Inventory	-$2,000
	Increase in Accounts Payable	$8,000
	Decrease in Salaries and Wages Payable	-$100	$3,900
I	Net Cash Flows from Operating Activities		$15,100
	Cash Flows from Investing Activities:
	Purchase of Equipment in Cash	-$16,000
II	Net Cash Flows from Investing Activities		-$16,000
	Cash Flows from Financing Activities:
	Proceeds from issue of shares	$11,000
	Long-term note payable	-$5,000
III	Net Cash flows from financing activities		$6,000
IV	Net Increase in Cash ( I + II + III )		$5,100
V	Cash balance at beginning of year		$26,750
VI	Cash Balance at the end of the year ( IV + V )		$31,850