Shallow Waters Company was started several years ago by two diving instructors.

Question

Shallow Waters Company was started several years ago by two diving instructors. The company's comparative balance sheets and income statement are presented below Current Year Prior Year Balance Sheet at December 31 Cash Accounts receivable Prepaid expenses Equipment 3,600$4.000 1,000 180 ,300 120 800 s 5,180 Wages payable Retained earnings Income Statement for Current Year 1,800 380 5,820 1,100 1,100 2 980 -S 5,180 $37.250 33,000 Wages expense Other expenses Net incorne S 400 Additional Data a. Prepaid expenses relate to rent paid in advance CPurchasedequien hor n at the and of the phor year to be used stating in cument yeor c. Purchased equipment for $8OD cash at the end of the prior year to be used starting in current year d. An owner contributed capital by paying $T00 Gash in exchange for the company's stock Required: Prepare the statement of cash tows for the year ended December 31, current year using the indirect method.(List cash outflows as negative amounts.) SHALLOW WATERS C Statement of Cash Flows

Explanation / Answer

Statement of Cash Flows For the Year Ended December 31, Current year Cash flows from operating activities: Net income 400 Adjustments to reconcile net income to net cash provided by operating activities: Increase in accounts receivable -300 Decrease in prepaid expenses 60 Decrease in wages payable -460 Net cash used for operating activities -300 Cash flows from investing activities: Cash paid for equipment -800 Net cash used for investing activities -800 Cash flows from financing activities: Cash proceeds from issuing stock 700 Net cash provided by financing activities 700 Net decrease in cash during the year -400 Cash balance, January 1 4000 Cash balance, December 31 3600

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