Heads Up Company was started several years ago by two hockey instructors. The co

Question

Heads Up Company was started several years ago by two hockey instructors. The company's comparative balance sheets and income statement follow, along with additional information Current Previous Year ear Balance Sheet at December 31 Cash Accounts Receivable Equipment Accumulated Depreciation Equipment(1 $ 6,300 $4,500 1,950 6,000 (1,700)(1,350) 1,000 6,600 $12,200 $11,100 Accounts Payable Salaries and Wages Payable Note Payable (long-term) Common Stock Retained Earnings $ 500 1,100 750 500 6,000 2,750 400 1,500 6,000 3,800 $12,200 $11,100 Income Statement Service Revenue Salaries and Wages Expense Depreciation Expense ncome Tax Expense $39,500 37,000 350 1,100 Net Income $1,050 Additional Data a. Bought new hockey equipment for cash, $600 b. Borrowed $1,000 cash from the bank during the year. c. Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that this expense was fully paid in cash.

Explanation / Answer

The cash flow statement is as below:

Particulars Amount ($) Amount ($) Cash flows from Operating Activities: Net Income 1050 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 350 Adjustments for changes in working capital Decrease in accounts receivable 950 Decrease in accounts payable -600 Decrease in salaries and wages payable -350 Cash flow from operating activities 1400 Cash flow from Financing Activities Purchase of hockey equipment -600 Cash flow from Financing Activities -600 Cash flow from Financing Activities Cash borrowed from bank 1000 Cash flow from Financing Activities 1000 Net increase in cash 1800 Beginning cash balance 4500 Ending cash balance 6300

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