Suppose the income statement for Goggle Company reports $135 of net income, afte

Question

Suppose the income statement for Goggle Company reports $135 of net income, after deducting depreciation of S25. The company bought equipment costing $110 and obtained a long-term bank loan for $120. 1. Calculate the change in each balance sheet account and indicate whether each account relates to operating, investing, and/or financing activities (+ for increase and- for decrease). (Select "NE" if there is no effect. Enter all amounts as positive values.) Change Type 45 $ 85 Cash 195 145 660 550 (35) Total Salaries and Wages Payable Notes Payable (long-term) Common Stock Retained Earnings (60) 955$1,260 70 575 20 595 955$1,260 455 20 Total

Explanation / Answer

1. Goggle Company (All amounts in $) Change in Each Balance Sheet Account Previous Current Change Type Year Year Cash 45 320 + 275 F Accounts Receivable 85 195 - 110 O Inventory 310 145 + 165 O Equipment 550 660 - 110 I Accumulated Depreciation = Equipment -35 -60 + 25 O 955 1260 Salaries and Wages Payable 20 70 + 50 O Notes Payable (Long-term) 455 575 + 120 F Common Stock 20 20 NE 0 F Retained Earnings 460 595 + 135 O 955 1260 2. Goggle Company (All amounts in $) Cash Flows using Indirect Method for the year ended December 31 Cash Flows from Operating Activities 135 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities 25 Changes in Current Assets and Current Liabilities 105 ( - Increase in Accounts Receivable + Decrease in Inventory + Increase in Accounts Payable) 265 Cash Flows from Investing Activities -110 Cash Flows from Financing Activities 120 Net Cash Inflows during the year 275 Cash/Cash Equivalents at the beginning of the year 45 Cash/Cash Equivalents at the end of the year 320 3. The cash flows are typical of a start up Company, given the lower volume of assets and liabilities in the Balance Sheet.

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