1) Suppose the income statement for Goggle Company reports $115 of net income, a
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Question
1) Suppose the income statement for Goggle Company reports $115 of net income, after deducting depreciation of $30. The company bought equipment costing $85 and obtained a long-term bank loan for $90.
Prepare a statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Previous Year Current Year Change Type Cash $40 $275 + 235 Operating Accounts Receivable 80 185 + 105 Operating Inventory 285 140 - 145 Operating Equipment 525 610 + 85 Investing Accumulated Depreciation - Equipment (40) (70) - 30 Operating Total $890 $1,140 Salaries and Wages Payable $15 $60 + 45 Operating Notes Payable (long-term) 450 540 + 90 Financing Common Stock 15 15 - Financing Retained Earnings 410 525 + 115 Operating Total $890 $1,140Explanation / Answer
Cash Flows from operating Activities : (A) Net Income 115 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Add : Depreciation Expenses 30 Changes in Current Assets and Current Liabilities Less : Increase in Accounts receivable 105 Add : Decrease in Inventory 145 Add : Increase in Salaries and Wages Payable 45 230 Cash Flows from Investing Activities:(B) Less : purchase of Equipment -85 Cash Flows from Financing Activities:© Add : Notes Payable 90 Common stock 0 90 Net Increase/ Decrease of Cash (A+B+C) 235 Cash balance of current year 275 Less : Cash Balance of Previous Year -40 Increase in Cash Balance 235 $ 0
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