Step-by-step explanation:
To prepare the statement of cash flows for ATM Software Developers using the indirect method, we need to analyze the given information and categorize the cash flows into operating, investing, and financing activities.
ATM SOFTWARE DEVELOPERS
Statement of Cash Flows
For the year ended December 31, 2021
Cash Flows from Operating Activities:
Net income $ 10,900
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation expense 5,390
Increase in accounts receivable (3,940)
Decrease in accounts payable (1,685)
Decrease in inventory 1,400
Decrease in prepaid rent 830
Net cash flows from operating activities $ 13,895 [10,900 + 5,390 - 3,940 - 1,685 + 1,400 + 830]
Cash Flows from Investing Activities:
Cash received from the sale of land (no gain or loss) $ 8,500
Purchase of equipment (39,490)
Net cash flows from investing activities ($ 30,990) [8,500 - 39,490]
Cash Flows from Financing Activities:
Issuance of common stock $ 12,700
Issuance of long-term notes payable 16,120
Payment of dividends (6,220)
Purchase of treasury stock (2,540)
Net cash flows from financing activities $ 20,060 [12,700 + 16,120 - 6,220 - 2,540]
Net increase in cash $ 1,965
Cash at the beginning of the period $ 7,985
Cash at the end of the period $ 9,950 [7,985 + 1,965]
The statement of cash flows is now complete, categorizing the cash flows into operating, investing, and financing activities.