Question

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data.
  

BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2020
Computer services revenue				$	24,907
Net sales					18,293
Total revenue					43,200
Cost of goods sold	$	14,652
Depreciation expense—Office equipment		370
Depreciation expense—Computer equipment		1,160
Wages expense		3,150
Insurance expense		465
Rent expense		2,275
Computer supplies expense		1,245
Advertising expense		590
Mileage expense		300
Repairs expense—Computer		910
Total expenses					25,117
Net income				$	18,083

BUSINESS SOLUTIONS
Comparative Balance Sheets
December 31, 2019, and March 31, 2020
	Mar. 31, 2020						Dec. 31, 2019
Assets
Cash		$	83,467					$	55,672
Accounts receivable			23,967						5,268
Inventory			624						0
Computer supplies			2,075						570
Prepaid insurance			1,020						1,615
Prepaid rent			775						775
Total current assets			111,928						63,900
Office equipment			7,600						7,600
Accumulated depreciation—Office equipment			(740	)					(370	)
Computer equipment			19,700						19,700
Accumulated depreciation—Computer equipment			(2,320	)					(1,160	)
Total assets		$	136,168					$	89,670
Liabilities and Equity
Accounts payable		$	0					$	1,110
Wages payable			925						600
Unearned computer service revenue			0						1,600
Total current liabilities			925						3,310
Equity
Common stock			114,000						79,000
Retained earnings			21,243						7,360
Total liabilities and equity		$	136,168					$	89,670

	BUSINESS SOLUTIONS Statement of Cash Flows (Indirect) For Quarter Ended March 31, 2020 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities Cash flows from investing activities Net cash used in investing activities Cash flows from financing activities Cash balance at December 31, 2019 Cash balance at March 31, 2020

Answer 1

Statement of Cash Flows - Indirect Approach
	Amount in $	Amount in $
Net income		$             18,083
Cash flows from operating activities
Adjustments for reconcile the net income to:
Depreciation ($ 370 + $ 1160)	$                1,530
Increase in account receivable	$            -18,699
Increase in inventory	$                  -624
Increase in Computer Supplies	$              -1,505
Decrease in prepaid insurance	$                   595
Decrease in account Payable	$              -1,110
Increase in wages payable	$                   325
Decrease in unearned service revenue	$              -1,600
		$            -21,088
Net cash from operating activities		$              -3,005
Cash flows from investing activities
Net cash used in investing activities		$                       -
Cash flows from Financing activities
Dividend Paid	$              -4,200
Purcashe of Commons stock	$             35,000
Net cash used in financing activities		$             30,800
Net increase in cash and cash equivalents		$             27,795
Add :Cash and cash equivalents at beginning of period		$             55,672
Cash and cash equivalents at end of period		$             83,467
WORKING NOTES:
Dividend Calculation
Net Profit =	$             18,083
Add: Beginning balance of Retained Earnings	$                7,360
Less: Ending balance of Retaiend Earnings	$             21,243
Dividend Paid	$                4,200