Question

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 Cash $ 6,180 $ 4,160 Accounts Receivable 890 1,730 Equipment 5,390 4,900 Accumulated Depreciation—Equipment (1,480 ) (1,240 ) $ 10,980 $ 9,550 Accounts Payable $ 710 $ 1,200 Salaries and Wages Payable 510 750 Note Payable (long-term) 1,600 500 Common Stock 4,900 4,900 Retained Earnings 3,260 2,200 $ 10,980 $ 9,550 Income Statement Service Revenue $ 39,700 Salaries and Wages Expense 37,200 Depreciation Expense 240 Income Tax Expense 1,200 Net Income $ 1,060 Additional Data: a. Bought new hockey equipment for cash, $490. b. Borrowed $1,100 cash from the bank during the year. c. Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that this expense was fully paid in cash. Required: 1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

HEADS UP COMPANY
statement of cash flows
For the year ended December 31
Particulars	$	$
Cash flows from operating activities
Net income		1060
Adjustments:
Depreciation expense	240
Decrease in Accounts receivable	840
Decrease in Accounts Payable	-490
Decrease in wages payable	-240	350
Net cash provided by operating activities		1410
Cash flows from investing activities:
Purchase of equipment	-490
Net cash used in investing activities		-490
cash flows from financing activities:
Amount received from Bank loan	1100
Net cash provided by financing activities		1100
Net cash increase during the year		2020
cash in the beginning		4160
cash in the end		6180