Question

Problem 12-7A The following are the financial statements of Skysong, Inc.. Skysong, Inc. Comparative Balance Sheets December 31 Assets 2019 2018 Cash $37,900 $20,300 Accounts receivable 32,200 18,800 Inventory 30,600 20,500 Equipment 59,400 77,100 Accumulated depreciation—equipment (29,300 ) (23,200 )    Total $130,800 $113,500 Liabilities and Stockholders’ Equity Accounts payable $28,300 $16,600 Income taxes payable 7,200 8,500 Bonds payable 27,500 33,900 Common stock 18,500 14,700 Retained earnings 49,300 39,800    Total $130,800 $113,500 Skysong, Inc. Income Statement For the Year Ended December 31, 2019 Sales revenue $241,200 Cost of goods sold 175,900 Gross profit 65,300 Operating expenses 23,000 Income from operations 42,300 Interest expense 4,000 Income before income taxes 38,300 Income tax expense 7,200 Net income $31,100 Additional data: 1. Dividends declared and paid were $21,600. 2. During the year, equipment was sold for $9,600 cash. This equipment cost $17,700 originally and had a book value of $9,600 at the time of sale. 3. All depreciation expense, $14,200, is in the operating expenses. 4. All sales and purchases are on account.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Amount $ 31,100 Skysong, Inc Statements of Cash Flows Particulars Amount Cash Flows from Operating activities: Net Income Adjustments to reconcile net income to net cash flows from operating activities: Add: Depreciation expense $ 14,200 Increase in Accounts Receivable $ (13,400) Increase in Inventory $ (10,100) Increase in Accounts Payable $ 11,700 Decrease in Income taxes payable $ (1,300) ($ 18,800 - $ 32,200) ($ 20,500 - $ 30,600) ($ 28,300 - $ 16,600) ($ 7,200 - $ 8,500) $ $ 1,100 32,200 Net Cash flow provided by Operating activities Investment activities: Cash received on sale of equipment Net Cash used in Investing activities $ 9,600 $ 9,600 Financing activities: Cash paid to discharge bonds payable Cash received on issue of common stock Cash dividends paid Net Cash flow from financing activities $ $ $ (6,400) 3,800 (21,600) ($ 27,500 - $ 33,900) ($ 18,500 - $ 14,700) $ (24,200) Net increase (decrease) in cash Cash at the beginning of the period Cash at the ending of the period $ $ $ 17,600 20,300 37,900