SERIAL PROBLEM (This serial problem began in Chapter I and continues through mos

Question

SERIAL PROBLEM (This serial problem began in Chapter I and continues through most of the book. If previous chapter seg- Business Solutions (Indirect) P1 P2 P3 ments were not completed, the serial problem can begin at this point.) SP 12 Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we will prepare the statement of cash flows using the following financial data.) BUSINESS SOLUTIONS Comparative Balance Sheets December 31, 2017, and Maigb 31, 2018 Mar. 31, 2018 Dec. 31, 2017 Assets Cash Accounts receiveble S 68,057 22,867 704 2.005 1,110 825 95,568 8,000 $48,372 5.668 Computer supplies Prepaid insurance Prepaid rent Total current assets Office equipment Accumulated depreciation-Office BUSINESS SOLUTIONS Income Statement For Three Months Ended March 31, 2018 1.665 57.110 Computer services revenue $25,307 18,693 44,000 Total revenue.·… Cost of goods sold … Depreciation expense- $14,052 Computer equipment. Accumulated depreciation- 20,000 20,000 400t Computer equipment Total assets Liabilities and Equity Accounts payable Unearned computer service revenue Total current iabilities 2.500 $120,268 ,250) $83.460 Depreciation expense- Wages expense nsurance expense Rent expense Computer supplies expense Advertising expense Mleage expense Repairs expense-Computer . Total expenses. Net income 3,250 So 1100 500 1500 3,100 875 1,305 600 320 960 875 Common stock Retained earnings 98,000 73,000 25,167 18,833 21,3931360 $83.460 $120.268 Required Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2018. Recall that owner S Check Cash flows used by a Rey contributed $25,000 to the business in exchange for additional stock in the first quarter of 2018 and has received $4,800 in cash dividends.

Explanation / Answer

BUSINESS SOLUTIONS Statement of Cash Flows (Indirect) For Quarter Ended March 31, 2018 Cash flows from operating activities Net income   $     18,833 Adjustments to reconcile net income to net cash provided by operating activities Increase in accounts receivable ($22,867 - $5,668)        (17,199) Increase in inventory ($704 - $0)            (704) Increase in computer supplies ($2,005 - $580)         (1,425) Decrease in prepaid insurance ($1,665 - $1,110)              555 Decrease in accounts payable ($1,100 - $0)         (1,100) Increase in wages payable ($875 - $500)              375 Decrease in unearned computer service revenue         (1,500) Depreciation expense–Office Equipment              400 Depreciation expense–Computer Equipment           1,250 Net cash provided by operating activities ($515) Cash flows from investing activities Net cash used in investing activities                -   Cash flows from financing activities Cash received from stock issuance         25,000 Cash paid for dividends         (4,800) Net cash provided by financing activities         20,200 Net increase in cash $     19,685 Cash balance at December 31, 2017         48,372 Cash balance at March 31, 2018 $     68,057

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