3. Computer Service and Repair was started five years ago by two college roommat

Question

3. Computer Service and Repair was started five years ago by two college roommates. The company's comparative balance sheets and income statement are presented below, along with additional information. Current Year Prior Year Balance Sheet at December 31 Cash Accounts receivable Prepaid expenses Equipment $ 3,250 700 100 350 $ 4,000 500 50 S 4,350 4,550 Wages payable Short-term note paya Common stock Retained earnings $ 35010 S1,100 250 1,000 ble 1,000 2.75050 2.450 135 Income Statement for Current Year Service revenue Depreciation expense $34,000 50 30,000 Salaries expense Other expenses Net income $ 300 Additional Data: a. Prepaid expenses relate to rent paid in advance. b. Other expenses were paid in cash. c. Purchased equipment for $350 cash at the beginning of the current year and recorded $50 of depreciation expense at the end of the current year d. At the end of the current year, the company signed a short-term note payable to the bank for 5250 Required: Prepare the statement of cash flows for the year ended December 31, current year, using the indirect method. (List cash outflows as negative amounts.)

Explanation / Answer

Answer:-

Computer Service & Repair Statement of Cash Flow (Using Indirect Method) For the year ended December 31 Particulars Amount $ Cash flow from opreating activities Net Income 300 Adjustments to reconcile net income to net cash provided by opreating activities Adjustment for non cash effects Depreciation 50 Change in opreating assets & liabilities Increase in Accounts Receiviable -200 Increase in Prepaid expenses -50 Decrease in wages payable -750 Increase in short term note payable 250 Net cash flow from opreating activities (a) -400 Cash Flow from Financing activities Net cash Flow from Financing activities (b) 0 Cash Flow from Investing activities Purchase of Equipment -350 Net cash Flow from Investing activities (c) -350 Net Channge in cash c=a+b+c -750 Beginning cash balance 4000 Closing cash balance 3250

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