Question

Shallow Waters Company was started several years ago by two diving instructors. The company's comparative balance...

Shallow Waters Company was started several years ago by two diving instructors. The company's comparative balance sheets and income statement are presented below, along with additional information.

  

   2015 2014
Balance Sheet at December 31
  Cash $ 3,500    $ 3,900
  Accounts receivable 1,100    900
  Prepaid expenses 140    190
  Equipment 700    0
  
$ 5,440    $ 4,990
  
  Wages payable $ 750    $ 1,300
  Contributed capital 2,000    1,500
  Retained earnings 2,690    2,190
  
$ 5,440    $ 4,990
  
Income Statement for 2015
  Lessons revenue $ 36,250   
  Wages expense 32,000   
  Other expenses 3,750   
  
  Net income $ 500   
  

  

Additional Data:
a. Prepaid expenses relate to rent paid in advance.
b. Other expenses were paid in cash.
c. Purchased equipment for $700 cash at the end of 2015 to be used starting in 2016.
d. An owner contributed capital by paying $500 cash in exchange for the company’s stock.


Required:

Prepare the statement of cash flows for the year ended December 31, 2015, using the indirect method.(List cash outflows as negative amounts.)

Homework Answers

Answer #1

Prepare the statement of cash flows for the year ended December 31, 2015, using the indirect method.(List cash outflows as negative amounts.)

Cash flow from operating activities
Net income 500
Adjustment to reconcile net income to net cash flow from operating activities
Increase account receivable (1100-900) -200
Decrease prepaid expense (140-190) 50
Decrease wages payable (1300-750) -550
-700
Net cash used in operating activities -200
Cash flow from investing activities
Purchase equipment -700
Net cash used in investing activities -700
Cash flow from financing activities
Issue Common Stock 500
Net cash flow from financing activities 500
Net cash increase (decrease) -400
Beginning cash 3900
Ending Cash 3500
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