Question

Sharp Screen Films, Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Current Year Prior Year Balance sheet at December 31 Cash $ 66,950 $ 66,200 Accounts receivable 19,750 25,950 Merchandise inventory 25,950 20,800 Property and equipment 214,150 152,800 Less: Accumulated depreciation (63,400 ) (47,950 ) $ 263,400 $ 217,800 Accounts payable $ 13,500 $ 23,800 Wages payable 5,400 6,000 Note payable, long-term 64,000 76,200 Common stock and additional paid-in capital 104,200 67,800 Retained earnings 76,300 44,000 $ 263,400 $ 217,800 Income statement for current year Sales $ 213,000 Cost of goods sold 110,000 Depreciation expense 15,450 Other expenses 44,800 Net income $ 42,750 Additional Data: Bought equipment for cash, $61,350. Paid $12,200 on the long-term note payable. Issued new shares of stock for $36,400 cash. Dividends of $10,450 were declared and paid. Other expenses all relate to wages. Accounts payable includes only inventory purchases made on credit.

Required:

1. Prepare the statement of cash flows using the indirect method for the year ended December 31, current year.

Answer 1

Please see below for solution:

Step-by-step explanation:

Mitch Company

Statement of Cash Flow

As of December 31, 2017

CASH FLOWS FROM OPERATING ACTIVITIES $

Net Income 42,750

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation on Fixed Assets 15,450

(Increase) Decrease in Current Assets:

Accounts Receivables 6,200

Merchandise Inventory (5,150)

Increase (Decrease) in Current Assets:

Accounts Payable (10,300)

Wages payable (600)

NET CASH PROVIDED BY OPERATING ACTIVITIES 48,350

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Property and equipment (61,350)

NET CASH USED IN INVESTING ACTIVITIES (61,350)

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of Note Payable, Long Term (12,200)

Payment of Cash Dividends (10,450)

Issuance of Common Stock and additional paid-in capital 36,400

NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES 13,750

NET INCREASE (DECREASE) IN CASH 750

Cash Balance, December 31 2016 66,200

Cash Balance, December 31 2017 66,950