Adria Lopez, owner of Success Systems, decides to prepare a statement of cash fl

Question

Adria Lopez, owner of Success Systems, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we will prepare the statement of cash flows using the following financial data.)

Prepare a statement of cash flows for Success Systems using the indirect method for the three months ended March 31, 2014. Recall that the owner Adria Lopez contributed $25,000 to the business in exchange for additional stock in the first quarter of 2014 and has received $4,400 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

SUCCESS SYSTEMS Income Statement For Three Months Ended March 31, 2014   Computer services revenue $ 25,107   Net sales 18,593   Total revenue 43,700   Cost of goods sold $ 14,452   Depreciation expense—Office equipment 330   Depreciation expense—Computer equipment 1,210   Wages expense 2,650   Insurance expense 525   Rent expense 2,475   Computer supplies expense 1,205   Advertising expense 510   Mileage expense 300   Repairs expense—Computer 950   Total expenses 24,607   Net income $ 19,093

Explanation / Answer

Statement of Cash Flows March 2014 Cash flows from operating activities Profit before taxation $19,093.00 Adjustments for: Depreciation (330+1210) 1540 Working capital changes: Increasein accounts receivable (19,299.00) (Increase) in inventories       (624.00) (Increase) in Computer Supplies    (1,495.00) Decrease in prepaid insurance         585.00 (Decrease) in Accounts Payable    (1,190.00) (Decrease) in Unearned Revenue    (2,400.00) Increase in Wages payable         395.00 Cash generated from operations    (3,395.00) Net cash from operating activities    (3,395.00) Cash flows from financing activities Issue of Common Stock    25,000.00 Payment of Dividend    (4,400.00) Net cash used in financing activities    20,600.00 Net increase in cash and cash equivalents 17,205.00 Cash and cash equivalents at beginning of period 50,332.00 Cash and cash equivalents at end of period 67,537.00

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