Question 7: LANGARD ENTERPRISES Income Statement For the Year Ended December 31,

Question

Question 7: LANGARD ENTERPRISES Income Statement For the Year Ended December 31, year 2 ($ in thousands) Sales revenue Operating expenses: $7,100 Cost of goods sold Depreciation Insurance Administrative and other $3,408 260 130 1,820 5618 1,482 Total operating expenses Income before income taxes Income tax expense Net income 889 LANGARD ENTERPRISES Comparative Balance Sheet As of December 31, year 2 and year 1(S in thousands) 12/31/year 2 12/31/year 1 Assets: Cash Accounts receivable Inventory Prepaid insurance Plant and equipment Less: Accumulated depreciation $ 494 240 820 540 24 1,760 741 576 60 1,953 Total assets Liabilities and Shareholders' equity: Accounts payable Payables for administrative and other expenses Income taxes payable Note payable (due 12/31/year 3) Common stock Retained earnings S 342 285 160 920 1,013 410 380 120 690 900 Total liabilities and shareholders' equity Required Prepare Langard's statement of cash flows, using the indirect method to present cash flows from operating activities.

Explanation / Answer

Solution:

Langard Enterprises Statement of Cash Flows For period ended December 31, Year 2 (In '000) Particulars Details Amount Cash Flow from Operating Activities: Net Income $889.00 Adjustments to reconcile net income to net cash provided by operations: Depreciation Expense $260.00 Decrease in accounts receivables ($820 - $741) $79.00 Increase in inventory ($576 - $540) -$36.00 Increase in prepaid insurance ($60 - $24) -$36.00 Decrease in accounts payable ($410 - $342) -$68.00 Decrease in payable for administrative and other expenses ($380 - $285) -$95.00 Increase in income tax payable ($160 - $120) $40.00 Net Cash provided by operating activities $1,033.00 Cash Flow from Investing Activities: Purchase of Plant and Equipment ($1,953 - $1,760) -$193.00 Net Cash Provided by Investing activities -$193.00 Cash Flow from Financing Activities: Proceed from issue of common stock ($1,013 - $900) $113.00 Proceed from borrowings by issuing note ($920 - $690) $230.00 Dividend Paid ($304 + $889 - $264) -$929.00 Net Cash Provided by financing activities -$586.00 Net Increase / (Decrease) in Cash $254.00 Cash balance at beginning of year $240.00 Cash balance at end of year $494.00

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