A comparative balance sheet and income statement is shown for Cruz, Inc. Require

ID: 2569143 • Letter: A

Question

A comparative balance sheet and income statement is shown for Cruz, Inc.

Required:
Use the indirect method to prepare the cash provided or used from operating activities section only of the statement of cash flows for this company. (Amounts to be deducted should be indicated with a minus sign.)

CRUZ, INC.
Comparative Balance Sheets
December 31, 2017 2017 2016 Assets Cash $ 75,900 $ 18,900 Accounts receivable, net 32,600 40,100 Inventory 68,300 75,300 Prepaid expenses 4,200 3,500 Total current assets 181,000 137,800 Furniture 84,600 99,200 Accum. depreciation—Furniture (13,100 ) (7,500 ) Total assets $ 252,500 $ 229,500 Liabilities and Equity Accounts payable $ 11,900 $ 16,900 Wages payable 7,100 4,000 Income taxes payable 1,200 2,200 Total current liabilities 20,200 23,100 Notes payable (long-term) 24,800 58,400 Total liabilities 45,000 81,500 Equity Common stock, $5 par value 177,300 141,500 Retained earnings 30,200 6,500 Total liabilities and equity $ 252,500 $ 229,500

Explanation / Answer

Net income

$24300

Add: Deprecition expense

$30200

$54500

Add: Decrease in current assets;

Accounts receivable

$7500

Inventory

$7000

$14500

$69000

Add: Increase in current liabilities;

Wages payable

$3100

$72100

Less: Increase in current assets;

Prepaid expenses

- $700

$71400

Less: Decrease in current liabilities;

Accounts payable

- $5000

Income tax payable

- $1000

- $6000

Cash provided (inflow) from operating activities

$65400

Working Note:

1. Income tax expense is an operating expense that is why it will not be added back to net income.

2. Depreciation is a non-cash expense that is why it will be added back to net income.

3. Increase in current assets is an outflow of cash that is why these will be deducted.

4. Decrease in current assets is an inflow of cash that is why these will be added.

5. Decrease in current liabilities is an outflow of cash that is why these will be deducted.

6. Increase in current liabilities is an inflow of cash that is why these will be added.