Question

MONTGOMERY INC. Comparative Balance Sheets December 31, 2016 and 2015
		2016				2015
Assets
Cash	$	30,400			$	30,550
Accounts receivable, net		10,050				12,150
Inventory		90,100				70,150
Total current assets		130,550				112,850
Equipment		49,900				41,500
Accum. depreciation—Equipment		(22,500	)			(15,300	)
Total assets	$	157,950			$	139,050
Liabilities and Equity
Accounts payable	$	23,900			$	25,400
Salaries payable		500				600
Total current liabilities		24,400				26,000
Equity
Common stock, no par value		110,000				100,000
Retained earnings		23,550				13,050
Total liabilities and equity	$	157,950			$	139,050

MONTGOMERY INC.
Income Statement
For Year Ended December 31, 2016

  Sales

$

45,575

  Cost of goods sold

(18,950

)

  Gross profit

26,625

  Operating expenses

    Depreciation expense

$

7,200

    Other expenses

5,550

  Total operating expense

12,750

  Income before taxes

13,875

  Income tax expense

3,375

  Net income

$

10,500

Additional Information

a.	No dividends are declared or paid in 2016.
b.	Issued additional stock for $10,000 cash in 2016.
c.	Purchased equipment for cash in 2016; no equipment was sold in 2016.

1.	Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2016, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Statement of cash flow :

Cash flow from operating activities
Net income		10500
Adjustment to reconcile net income
Depreciation expense	7200
Decrease account receivable	2100
Increase inventory	-19950
Decrease account payable	-1500
Decrease salary payable	-100
		-12250
Net cash flow from operating activities		-1750
Cash flow from investing activities
Purchase equipment	-8400
Net cash flow from investing activities		-8400
Cash flow from financing activities
Issue common stock	10000
Net cash flow from financing activities		10000
Net cash flow		-150
Beginning cash		30550
Ending cash		30400