PB12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 1 Audi

Question

PB12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 1 Audio City, Inc. 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 below Current Previous Year Year Balance Sheet at December 31 $ 67,500 $ 71,600 16,200 21,500 23,800 21,500 229,000 153,000 Cash Accounts Receivable Accumulated Depreciation-Equipment (64,500) (48,000) S272,000 $219,600 Accounts Payable Salaries and Wages Payable Note Payable (long-term) Common Stock Retained Eanings S 8,300 19,600 2,000 1,000 61,500 78,000 106,000 73,00 94,200 48,000 $272,000 $219,600 Income Statement Sales Revenue Other Expenses Net income $209,000 93,000 64,500 Cost of Goods Sold $ 51,500 Additional Data a.Bougl, egaprnent tor cash, $7.000. b. Paid $16,500 c on the long-term note payable Issued new shares of stock for $33,000 cash of 55.300 were paid in cash e Other expenses included depreciation, $16,500, salaries and wages $21,500, tsxes, $26,500 t Accounis Payable includes only essume that they were fully paid in on credit Because a liability relaling to taxes does not exista cash Prepare the deducted sheuld bo ndicated by a minus sign 31 using the indirect method esc 2 ab

Explanation / Answer

AUDIO CITY INC Statement of Cashflows For the year Ended December 31 Cash flows from operating activities Net Income $   51,500 Adjustments to reconcile net income to : Depreciation expense $   16,500 Decrease in accounts receivable $      5,300 21500-16200 Increase in inventory $   (2,300) 21500-23800 Decrease in accounts payable $ (11,300) 8300-19600 Increase in salaries and wages payable $      1,000 2000-1000 $      9,200 Net cash flow from operating activities $   60,700 Cash flows from investing activities Cash paid for Purchase of equipment $ (76,000) Net cash used by investing activities $ (76,000) Cash flows from financing activities Cash paid for dividend $   (5,300) Proceeds from issue of common stock $   33,000 Repayment of long term note payable $ (16,500) Net cash flow from financing activities $   11,200 Net increase in cash and cash equivalents $   (4,100) Cash and cash equivalents at beginning of period $   71,600 Cash and cash equivalents at end of period $   67,500

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