Problem 3: Statement of Cash Flows (Prepare on Separate Sheet) Based on the foll

Question

Problem 3: Statement of Cash Flows (Prepare on Separate Sheet) Based on the following information: a.) Prepare the Statement of Cash Flows in good form using the Indirect Method we used. b.) Analyze Stacy's Bar and Grill Statement of Cash Flows Stacy's Bar and Grill, Inc. Comparative Balance Sheets December 31, 2017 and 2016 2016 S Change Source/Use Current Assets: Cash Accounts Receivable 29,000 Merchandise Inventory 165,000 140,000 Long-Term Assets: Investments Equipmnr. Equip.20, (1.000 Accum. Depr. Equip. (48,000) Patent Accum. Amort. 2017 S56,000 S 33,000 23,000 20,000 90,000 77,000 (30,000) 10,000 20,000 10.000) (1.000) Total Assets 322,000 252,000 Current Liabilities: Accounts Payable Income Taxes Payable 2,000 Long-Term Liabilitics: Bonds Payable Stockholder's Equity: Common Stock, Par 135,000 Paid in Capital in Excess 77,000 Of Par on Common Sth. Retained Earnings 56.000 $ 42,000 S 36,000 7,000 40,000 100,000 10,000 65,000 Total Liab. and Equity 322,000 252,000 Stacey's Bar and Grill, Inc. Consolidated Income Statement For the Year Ended December 31, 2017 S610,000 Sales Cost of Goods Sold Gross Profit Operating Expenses: 331,000 Depreciation Expense 18,000 *Other Expenses Interest 25,000 Tax Expense Net Income 243,000 S 88.000 Includes $9,000 of patent amortization Expense * Note: Common Stock Dividends of $36,000 were paid out on December 31, 2017

Explanation / Answer

a)

b) It was seen cash generated from operating activities was used to Purchase Assets which is why the cash flow from Investing Activities is negative. Company is also able to pay its bond liaibility and increased its equity capital. Company has increased its investment in inventory and account receivable. Overall its a Positive increase in cash flow.

INDIRECT METHOD Stacy's Bar and Grill Inc Statement of Cash Flows For the Years Ending December 31, 2017 2017 Cash Flows from Operating Activities Net Income $        88,000.00 Adjustments Add: Depreciation $        18,000.00 Add: Amortization of Patent $          9,000.00 Add: Income tax payable $        45,000.00 Less: Income tax paid $       (50,000.00) Add: Interest Paid $        25,000.00 Less: Increase in Accounts Receivable $         (6,000.00) Less: Increase in Inventory $       (25,000.00) Add: Increase in Accounts Payable $          6,000.00 Net Cash from Operating Activities $    110,000.00 Cash Flows from Investing Activities Purchase of Investments $       (20,000.00) Purchase of Equipment $       (13,000.00) Purchase of Patent $       (10,000.00) Net Cash Used for Investing Activities $     (43,000.00) Cash Flows from Financing Activities Payment for Bonds $       (30,000.00) Received Amount for Common Stock $        35,000.00 Increase in Paid in Capital $        12,000.00 Interest Paid $       (25,000.00) Dividends Paid $       (36,000.00) Net Cash from Financing Activities $       (8,000.00) NET INCREASE/(DECREASE) IN CASH $        23,000.00 CASH, BEGINNING OF YEAR $        33,000.00 CASH, END OF YEAR $        56,000.00

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