Question

PA12-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-3, LO 12- 4, LO 12-5) 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 55,300 900 5.se (1,500) $11.200 S $4.ee 1.75e 5,000 1,250) $ 9.5 $ 1.ee 500 500 1,700 Accounts Receivable Equipment Accumulated Depreciation Equipment Total Assets Accounts Payable Salaries and Wages Payable Note Payable (long-tera) Corso Stock Retained Earnings Total Liabilities and Stockholders' Equity Income Statecent Service Revenue Salaries and wages Expense Depreciation Expense Income Tax Expense Not income $11.200 $37.See 35. 1. eee $ 1.250 Additional Data: a Bought new hockey equipment for cash, $500. b. Borrowed $1.200 cash from the bank during the year c Accounts Payable includes only purchases of services made on credit for operating purposes. accounts relating to income tax assume that this expense was fully paid in cash Required: 1. Prepare the statement of cat ows for the current year ended December 31 using the indirect method (Amounts to be deducted should be indicated with a minus sign)

Answer 1

Answer

Cash Flow from Operating Activities
Net Income		$             1,250
Adjustments
Depreciaton	$     250
Decrease in Account receivable	$     850
Decrease in salaries and wages payable	$   (250)
Decrease in Account payable	$   (500)
		$             1,600
Cash Flow from Investing Activities
Equipment purchased	$   (500)	$              (500)
Cash Flow from Financing Activities
Notes payable issued	$ 1,200
		$             1,200
Total cash Flows		$             2,300
Add: Opening Cash		$             4,000
Closing Cash		$             6,300

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