Question

Suppose the income statement for Goggle Company reports $111 of net income, after deducting depreciation of $31. The company bought equipment costing $80 and obtained a long-term bank loan for $86. The company's comparative balance sheet, at December 31, is presented here. Required: 1. Calculate the change in each balance sheet account and indicate whether each account relates to operating, investing, and/or financing activities (+for increase and for decrease) 2. Prepare a statement of cash flows using the indirect method. 6. Are the cash flows typical of a start-up, healthy, or troubled company? Calculate the change in each balance sheet account and indicate whether each account relates to operating, investing, and/or financing activities (+for increase and - for decrease). (Select "NE" if there is no effect. Enter all amounts as positive values.) Previous Year 39 79 280 520 (41) Current Year 268 183 139 600 (72) 1,118 58 535 Change Type Cash Accounts Receivable Inventory Equipment Accumulated Depreciation-Equipment 877$ Total laries and Wages Payable Notes Payable (long-term) Common Stock Retained Earnings 14 $ 449 14 400 511 877$ 1,118 Total

Answer 1

Particulars	Previous year	Current year
Cash	39	268	229	Operating
Accounts receivable	79	183	104	Operating
Inventory	280	139	-141	Operating
Equipment	520	600	80	Investing
Accumulated depreciation equipment	-41	-72	-31	Investing
Total	877	1118	241
Salaries and wages payable	14	58	44	Operating
Notes payable long term	449	535	86	Financing
Common stock	14	14	0	Financing
Retained earnings	400	511	111	NE
Total	877	1118	241

Cash flow indirect method
Cash flow from operating activities
Net income		111
Adjustments to reconcile the net income
Depreciation and Amortization expense	31
Interest expense
Changes in current asset and liabilities
Increase in accounts receivable	-104
Decrease in inventory	141
Increase in Salaries and wages payable	44
Increase in income tax payable
		112
Cash generated from operations		223
Cash flow from Investing activities
Equipment sold
Equipment purchased	-80
Cash flow from Investing activities		-80

	Cash flow from Financing activities
	Common stock	0
	Notes payable	86
	Dividend
	Cash flow from Financing activities		86
	Net Cash and cash equivalent		229
Add	Beginning cash and cash equivalent		39
	Ending cash and cash equivalent		268