Question

XS Supply Company 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 below:

	Current Year				Prior Year
Balance sheet at December 31
Cash	$	36,300			$	31,400
Accounts receivable		38,900				31,500
Merchandise inventory		42,000				40,300
Property and equipment		125,200				102,500
Less: Accumulated depreciation		(33,700	)			(27,000	)
	$	208,700			$	178,700
Accounts payable	$	40,100			$	31,200
Wages payable		3,400				3,800
Note payable, long-term		47,100				55,600
Common stock and additional paid-in capital		94,000				74,600
Retained earnings		24,100				13,500
	$	208,700			$	178,700
Income statement for current year
Sales	$	136,000
Gain on sale of equipment		1,000
Cost of goods sold		86,000
Other expenses		40,400
Net income	$	10,600

Additional data:

1. Bought equipment for cash, $32,700. Sold equipment with original cost of $10,000, accumulated depreciation of $8,000, for $3,000 cash.
2. Paid $8,500 on the long-term note payable.
3. Issued new shares of stock for $19,400 cash.
4. No dividends were declared or paid.
5. Other expenses included depreciation, $14,700; wages, $12,800; taxes, $6,300; and other, $6,600.
6. Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the year ended December 31, current year, using the indirect method. (List cash outflows as negative amounts.)

Answer 1

Statement of Cash Flow:
	Amount $
Cash from Operating Activities:
Net Income	10600
Add: Depreciation	14700
Less:Gain on sale of equipment	-1000
Less: Increase in AR	-7400		31500-38900
Less: Increase in M Inv.	-1700		40300-42000
Add:Increase in AP	8900		40100-31200
Less: Decrease in WP	-400		3400-3800
Cash inflow from Operating Activities	23700
Cash from Investing Activities:
Less:Equipment purchased	-32700
Add:Sale of equipment	3000
Cash outflow of Investing Activities	-29700
Cash from Financing Activities:
Less: Payment of Notes	-8500
Add:Issue of shares	19400
Cash inflow of Financing Activities	10900
Cash flows from all Activities	4900
Add: Opening Cash	31400
Closing Cash	36300