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Presented below are the 2013 income statement and comparative balance sheets for

ID: 2352234 • Letter: P

Question

Presented below are the 2013 income statement and comparative balance sheets for Santana Industries.

SANTANA INDUSTRIES
Income Statement
For the Year Ended December 31, 2013
($ in thousands)
Sales revenue $ 14,250
Service revenue 3,400
________________________________________ ________________________________________
Total revenue $ 17,650
Operating expenses:
Cost of goods sold 7,200
Selling 2,400
General and administrative 1,500
________________________________________ ________________________________________
Total operating expenses 11,100
________________________________________ ________________________________________
Operating income 6,550
Interest expense 200
________________________________________ ________________________________________
Income before income taxes 6,350
Income tax expense 2,500
________________________________________ ________________________________________
Net income $ 3,850
________________________________________________________________________________ ________________________________________________________________________________
________________________________________

Balance Sheet Information ($ in thousands) Dec. 31,
2013 Dec. 31,
2012
________________________________________ ________________________________________
Assets:
Cash $ 7,350 $ 2,200
Accounts receivable 2,500 2,200
Inventory 4,000 3,000
Prepaid rent 150 300
Plant and equipment 14,500 12,000
Less: Accumulated depreciation (5,100 ) (4,500 )
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Total assets $ 23,400 $ 15,200
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Liabilities and Shareholders

Explanation / Answer

Statement of cash flows (indirect method)

Cash flows from operating activities

Net income

3,850

adjustments to net income

depreciation

1,600

Increase in accounts receivable

-300

Increase in inventory

-1,000

Decreased in prepaid rent

150

Increase in accounts payable

300

Increase in interest payable

100

Increase in unearned revenue

200

Decrease in income tax payable

-250

Increase in loan payable

5,000

net cash provided by operating activities

9,650

Cash flows from investing activities

Purchase of equipment

-4,000

Sale of equipment

500

net cash provided by investing activities

-3,500

Cash flows from financing activities

payment of dividend

-1,000

net cash provided by financing activities

-1,000

net increase in cash

5,150

Cash balance, beginning

2,200

cash balance, ending

7,350

Statement of cash flows (indirect method)

Cash flows from operating activities

Net income

3,850

adjustments to net income

depreciation

1,600

Increase in accounts receivable

-300

Increase in inventory

-1,000

Decreased in prepaid rent

150

Increase in accounts payable

300

Increase in interest payable

100

Increase in unearned revenue

200

Decrease in income tax payable

-250

Increase in loan payable

5,000

net cash provided by operating activities

9,650

Cash flows from investing activities

Purchase of equipment

-4,000

Sale of equipment

500

net cash provided by investing activities

-3,500

Cash flows from financing activities

payment of dividend

-1,000

net cash provided by financing activities

-1,000

net increase in cash

5,150

Cash balance, beginning

2,200

cash balance, ending

7,350

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