Question

Prior Year MONTGOMERY INC. Comparative Balance Sheets December 31 Current Year Assets Cash $ 32,300 Accounts receivable, net 10,600 Inventory 95, 100 Total current assets 138,000 Equipment 52,700 Accum. depreciation-Equipment (23,880) Total assets $166,990 Liabilities and Equity Accounts payable $ 25,300 Salaries payable 500 Total current liabilities 25,800 Equity Common stock, no par value 117,300 Retained earnings 23,800 Total liabilities and equity $166,960 $ 32,400 13,000 75,1ee 120,500 44,500 16,580) $ 148,500 $ 27,400 600 28,000 107,400 13,160 $148,500 MONTGOMERY INC. Income Statement For Current Year Ended December 31 Sales $ 46,200 Cost of goods sold (19,200 Gross profit 27,000 Operating expenses Depreciation expense $ 7,300 other expenses 5,600 Total operating expense 12,900 Income before taxes 14,100 Income tax expense 3,400 Net income $ 10,700 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $9.900 cash. c. Purchased equipment for cash; no equipment was sold.

Answer 1

MONTGOMERY, INC.
Statement of Cash Flows (Indirect Method)
For Current Year Ended December 31
Cash flows from operating activities:
Net Income	10,700
Adjustments to reconcile net income to net cash provided operations:
Income statement items not affecting cash
Depreciation expense	7,300
Change in current operating assets and liabilities
Decrease in accounts receivable, net	2,400
Increase in inventory	(20,000)
Decrease in accounts payable	(2,100)
Decrease in salaries payable	(100)
Net cash used by operating activities:		(1,800)
Cash flows from investing activities:
Purchase of equipment	(8,200)
Net cash used by investing activities:		(8,200)
Cash flows from financing activities:
Issue of stock	9,900
Net Cash provided by financing activities:		9,900
Net increase (decrease) in cash		(100)
Cash balance at beginning of year		32,400
Cash balance at end of year		32,300