Question

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PA12-3 Preparing a Statement of Cash Flows (Indirect Method) (LO 12-2, LO 12-3, LO 12-4, LO 12-5] XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: Current Year Previous Year Balance Sheet at December 31 Cash Accounts Receivable Inventory Equipment Accumulated Depreciation-Equipment Total Assets Accounts Payable Salaries and Wages Payable Note Payable (long-term) Common Stock Retained Earnings Total Liabilities and Stockholders' Equity Income Statement Sales Revenue Cost of Goods Sold Other Expenses Net Income $ 34,000 35,000 41,000 121,000 (30,000) $ 201,000 $ 36,000 1,200 38,000 88,600 37,200 $ 201,000 $ 29,000 28,000 38,000 100,000 (25,000) $170,000 $ 27,000 1,400 44,000 72,600 25,000 $170,000 $120,000 70,000 37,800 $ 12,200 Additional Data: a. Bought equipment for cash, $21,000. b. Paid $6,000 on the long-term note payable. c. Issued new shares of stock for $16,000 cash. d. No dividends were declared or paid. e. Other expenses included depreciation, $5,000; salaries and wages, $20,000; taxes, $6,000; utilities, $6,800. f Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Answer 1

XS Supply Company
Statement of cash flows
For the year ended December 31
Cash flow from operating activities		Amount ($)
Net income		12,200
Adjustments to reconcile net income to net cash provided by operating activities:
Add:depreciation		5,000
Less:increase in accounts receivable		-7,000
Less:increase in inventories		-3,000
Add:increase in accounts payable		9,000
Less:salaries and wages payable		-200
Total cash flow from operating activities		16,000
Cash flow from investing activities
Purchase of equipment		-21,000
Total cash flow from investing activities		-21,000
Cash flow from financing activities
Cash payments on notes payable		-6,000
Cash receipts from issuing stock		16,000
Total cash flow from financing activities		10,000
Change in cash and cash equivalent		5,000
Add:cash and cash equivalent at the start of the year		29,000
Cash and cash equivalent at the end of the year		34,000