Santana Rey, owner of Business Solutions, decides to prepare a statement of cash

Question

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data.
  

  
Required:
Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2018. Owner Santana Rey contributed $34,000 to the business in exchange for additional stock in the first quarter of 2018 and has received $4,500 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

BUSINESS SOLUTIONS Income Statement For Three Months Ended March 31, 2018 Computer services revenue $ 24,607 Net sales 18,193 Total revenue 42,800 Cost of goods sold $ 14,952 Depreciation expense—Office equipment 300 Depreciation expense—Computer equipment 1,240 Wages expense 2,750 Insurance expense 465 Rent expense 1,875 Computer supplies expense 1,245 Advertising expense 580 Mileage expense 290 Repairs expense—Computer 900 Total expenses 24,597 Net income $ 18,203 BUSINESS SOLUTIONS Statement of Cash Flows (Indirect) For Quarter Ended March 31, 2018 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities Cash flows from investing activities Net cash used in investing activities Cash flows from financing activities Cash balance at December 31, 2017 Cash balance at March 31, 2018

Explanation / Answer

BUSINESS SOLUTIONS Comparative Balance Sheets December 31, 2017, and March 31, 2018 Mar. 31, 2018 Dec. 31, 2017 Difference Assets Cash $85,217 $59,812 $25,405 Accounts receivable $24,367 $4,868 $19,499 Inventory $644 $0 $644 Computer supplies $2,025 $490 $1,535 Prepaid insurance $1,070 $1,635 -$565 Prepaid rent $765 $765 $0 Total current assets $114,088 $67,570 $46,518 Office equipment $7,300 $7,300 $0 Accumulated depreciation—Office equipment -$600 -$300 -$300 Computer equipment $19,200 $19,200 $0 Accumulated depreciation—Computer equipment -$2,480 -$1,240 -$1,240 Total assets $137,508 $92,530 $44,978 Liabilities and Equity $0 Accounts payable $0 $1,110 -$1,110 Wages payable $945 $560 $385 Unearned computer service revenue $0 $2,000 -$2,000 Total current liabilities $945 $3,670 -$2,725 Equity $0 Common stock $115,000 $81,000 $34,000 Retained earnings $21,563 $7,860 $13,703 Total liabilities and equity $137,508 $92,530 $44,978 Required: Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2018. Owner Santana Rey contributed $34,000 to the business in exchange for additional stock in the first quarter of 2018 and has received $4,500 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.) BUSINESS SOLUTIONS Statement of Cash Flows (Indirect method) For Quarter Ended March 31, 2018 Cash flows from operating activities Net income $18,203 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense—Office equipment $300 Depreciation expense—Computer equipment $1,240 (Increase)/Decrease in Current Assets Accounts receivable -$19,499 Inventory -$644 Computer supplies -$1,535 Prepaid insurance $565 Increase /(Decrease ) in Current Liabilities Accounts payable -$1,110 Wages payable $385 Unearned computer service revenue -$2,000 Net Cash used in Operating Activities -$4,095 Cash flow from Investing Activities $0 Cash Flow from Financing Activities Issuance of Common Stock $34,000 Dividend Paid -$4,500 Net Cash flow provided by Financing Activities $29,500 Net Increase (Decrease) in Cash $25,405 Beginning Cash $59,812 Ending Cash $85,217

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