Question

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data. 60 points $ 24,807 18,293 43, 100 02:59:00 BUSINESS SOLUTIONS Income Statement For Three Months Ended March 31, 2020 Computer services revenue Net sales Total revenue Cost of goods sold $ 14, 252 Depreciation expense-Office equipment 320 Depreciation expense-Computer equipment 1,220 Wages expense 3,050 Insurance expense 535 Rent expense 1,475 Computer supplies expense Advertising expense Mileage expense Repairs expense-Computer 940 Total expenses Net income OWN 23,797 $19,303 825 825 BUSINESS SOLUTIONS Comparative Balance Sheets December 31, 2019, and March 31, 2020 Mar. 31, 2020 Dec. 31, 2019 Assets Cash $ 82,657 $ 59,912 Accounts receivable 24,367 4,668 Inventory 624 Computer supplies 2,025 480 Prepaid insurance 1,090 1,605 Prepaid rent Total current assets 111,588 67,490 Office equipment 7,700 7,700 Accumulated depreciation office equipment (640) (320) Computer equipment 19,900 19,900 Accumulated depreciation-Computer equipment (2,440) (1,220 Total assets $ 136, 108 $ 93,550 Liabilities and Equity Accounts payable $ 0 $ 1,140 Wages payable 945 550 Unearned computer service revenue 2,400 Total current liabilities 945 4,090 Equity Common stock 113,000 82,000 Retained earnings 22, 163 7.460 Total liabilities and equity $ 136, 108 $ 93,550 Required: Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2020. Owner Santana Rey contributed $31,000 to the business in exchange for additional stock in the first quarter of 2020 and has received $4,600 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Solution

BUSINESS SOLUTIONS
Statement of Cash Flows
For Quarter ended March 31 2020
A. Cash Flows from Operating Activity
Net Income	$ 19,303
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$ 1,540
Changes in current operating assets and liabilities:
Increase in accounts receivable	-$ 19,699
Increase in Inventory	-$ 624
Decrease in Accounts Payable	-$ 1,140
Increase in computer supplies	-$ 1,545
Increase in prepaid expense	$ 515
Increase in wages payable	$ 395
Decrease in unearned computer service revenue	-$ 2,400
Net cash flow from Operating activities		-$ 3,655
B. Cash flows from Investing Activities
Net Cash flows from Investing activities		$ 0
C. Cash Flows from Financing activities
Issue of Common stock	$ 31,000
Dividends paid	-$ 4,600
Cash flows from Financing activities		$ 26,400
Net Increase (Decrease) in Cash [A+B+C]		$ 22,745
Cash at the beginning		$ 59,912
Cash at the end		$ 82,657