PROBLEM 2 Company B, a merchandiser, just ended year 2013. Using the following i

Question

PROBLEM 2 Company B, a merchandiser, just ended year 2013. Using the following information, prepare a Statement of Cash Flows. a) All sales are credit sales b) All credits to Accounts Receivable reflect cash receipts from customers c) All purchases of inventory are on credit d) All debits to Accounts Payable reflect cash payments for inventory e) Other Expenses are all cash expenses 2 Any change in Income Taxes Payable reflects the accrual and cash payment of taxes g) Purchased equipment for $36,000 h) Issued 12,000 shares of common stock for S5 per share i) Declared and paid $89,000 in cash dividends Company B Income Statement For Year Ended Decemfer 2013 Sales Cost of Goods Sold Gross Profit Operating Expenses 1.192.000 1.086.000 06,000 Depreciation expense Other expenses Income before taxes Income taxes expenses Net income 54.000 494.000 158.000 22.000 S 136.000

Explanation / Answer

Assumed that, no dividend declared, no assets sold

COMPANY B Cash Flow Statement   For the year ended December 31, 2013 Cash flows from operating activities Net Income $    47,000 122000-75000 Adjustment to reconcile net income to: Depreciation expense $   54,000 158000-104000 Increase in accounts receivable $ (12,000) 71000-83000 Increase in inventory $ (75,000) 526000-601000 Increase in accounts payable $   16,000 87000-71000 Increase in income tax payable $      3,000 28000-25000 $ (14,000) Net cash flow from operating activities $    33,000 Cash flows from investing activities Cash paid for Purchase of equipment $ (36,000) 299000-335000 Net cash used for investing activities $ (36,000) Cash flows from financing activities Cash received from issuance of common stock $   60,000 592000-568000+196000-160000 Net cash flow from financing activities $    60,000 Net increase in cash and cash equivalents $    57,000 Cash and cash equivalents at beginning of period $ 107,000 Cash and cash equivalents at end of period $ 164,000

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