PA12-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Met Heads

Question

PA12-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Met Heads Up Company was started several years ago by two hockey instructors. The company's compar balance sheets and income statement follow, along with additional information. CurrentPrevious Year Year Balance Sheet at December 31 Cash Accounts Receivable Equipment 6,300 1,000 6,600 4,500 1,950 6,000 Accumulated Depreciation-Equipment (1,700) (1.350) $12.200 $11.100 Accounts Payable Salaries and Wages Payable Note Payable (long-term) Common Stock Retained Earnings $ 500 1,100 750 500 6,000 6,000 2,750 400 1,500 3,800 $12.200 $11.100 Income Statement Service Revenue Salaries and Wages Expense Depreciation Expense Income Tax Expense $39.500 37,000 350 1.100 Net Income s 1,050 Additional Data a. Bought new hockey equipment for cash, $600. b. Borrowed $1,000 cash from the bank during the year c. Accounts Payable includes only purchases of services made on credit for operating purposes. Beca there are no liability accounts relating to income tax, assume that this expense was fully paid in cas Required: 1. Prepare the statement of cash flows for the current year ended December 31 using the indirect me Amounts to be deducted should be indicated with a minus sign.) HEADS UP COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities:

Explanation / Answer

Statement of cash flow :

4500

Cash flow from operating activity Net income 1050 Adjustment to reconcile net income Depreciation exp 350 Decrease account receivable 950 Decrease account payable (600) Decrease salaries and wages payable (350) Net cash flow from operating activities 1400 Cash flow from investing activities Bought equipment (600) Net cash flow from investing activitie (600) Cash flow from financing activities Borrow money 1000 Net cash flow from financing activities 1000 Net cash flow 1800 Beginning cash

4500

Ending cash 6300

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