Question

LABILIBU W-20 Thiyo) Statement of cash flows; indirect method L04-8] Presented below is the 20 21 income statement and comparative balance sheet information for Tiger Enterprises TIGER ENTERPRISES Incon uumens To the Year End Dec in thousand 1, 2011 1,800 Operating expenses Cost of goods sold Depreciation expense Insurance expense General and administrative expense Total operating expenses Income before incontaxe The pense Net Income Balance sheet Intonation in thousands 4.340 $ 2,604 21 2020 (220) 1250 $ Accounts receivable Inventory Prepaid insurance Equipment Lars Acculated depreciation Total Liabilities and Shareholda E i Accounts payable Accrued liabilities for general administrative ex Income tax payable Noter payable du 12/01/2022) Conon stock Retained earnings Total liabilities and shareholders' equity 920 1180 4.490 $ 3.750 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

In calculating the cash flows statement from indirect method, we will start with the net income. We will add back the non cash item of depreciation in it. Then we will adjust the amount for increase or decrease in cash due to increase or decrease in current assets or current liabilities.Like, an increase in current assets will reduce cash, so we will deduct it and a decrease in current assets will increase cash, so we will add it. Similarly, an increase in current liabilities will increase cash, so it will be added and a decrease in current liabilities will reduce cash, so it will be deducted. Before proceeding with the cash flow statement, we will check for certain adjustments given as below:

(1) Dividend paid calculation:

Beginning retained earnings: $610

Add: Net income : $2604

Less: Ending retained earnings: ($1160)

Dividend paid : $2054

Statement of cash flows:

Description	Amount	Amount
Operating activities:
Net income	2604
Adjustments to reconcile net income
Add: Depreciation expense	360
Add: Decease in accounts receivable	140
Add: Increase in income tax payable	20
Add: Increase in notes payable	350
Less: Increase in inventory	-30
Less: Increase in prepaid insurance	-90
Less: Decrease in accounts payable	-120
Less: Decrease in accrued liabilities	-160
Cash flows from operating activities		3074
Investing activities:
Purchase of equipment	-900
Cash flows from investing activities		-900
Financing activities:
Proceeds from issue of common stock	100
Dividends paid	-2054
Cash flows from financing activities		-1954
Net increase in cash		220
Beginning cash balance		320
Ending cash balance		540