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 Year Previous Year Balance Sheet at December 31 Cash Accounts Receivable 980 8.380 3 6,560 4,520 1.910 5.800 Accumulated Depreciation-Equipment (1330) S 12.260 10.900 Accounts Payable Salaries and Wages Payable Note Payable (long-term) S 620 420 1,600 5.800 1.200 750 500 5.800 Common Stock Retained Earnings S 12.280 10.90 Income Statement Sales Revenue Salaries and Wages Expense Depreciation Expense Income Tax Expense Net Income S 39.100 S 38,600 330 1,000 S 1.170 Additional Data a. Bought new hockey equipment for cash, $580 b. Borrowed S1,100 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

Cash flow statement of heads up co.

sr.no. Particulars + plus - minus 1 net profit/income 1170 - 2 non cash expenses (depreciation) 330 - 3 income tax expenses 1000 - 4 increase in current liabilities and decrease in current assets(accounts receivable) 930 - 5 decrease in current liabilities and increase in current liabilities (accounts payable + salaries and wages payable) - 910 less:income tax 1000 cash flow from operating activities (I) 1520 - 6 bought hockey equipement - 580 cash flow from investing activity (II) - 580 7 borrowed from bank 1100 - cash flow from financing activities (III) 1100 - OPENING CASH BALANCE 4520 - NET INCREASE IN CASH AND CASH EQUIVALENTS (I +II+ III) 2040 CASH BALANCE OF CURRENT YEAR 6560

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