The following comparative balance sheets and income statement are available for

Question

The following comparative balance sheets and income statement are available for ABC Inc. Prepare a statement of cash flows for 2016 using the indirect method and analyze the statement.   

December 31,                                                                         2016                            2015

Cash                                                                                        $ 3 300                        $1 000

Accounts receivable(net)                                                  1,100                           600 I

inventory                                                                                  11,200                          4,300

Total Current Assets                                                                 $15,600                        $5,900

Plant and equipment                                                                 $ 3,000                         $2,300

Less accumulated depreciation                                                  (1,300)                        (800)

Plant and equipment (net)                                                          $ 1,700                        $1,500

Long-term invesbnents                                                             1,200                          900

Total Assets                                                                              $18,500                       $8,300

Accounts payable                                                                        $ 3 300                        $2,500

Accrued liabilities                                                                     700                             600

Income taxes payable                                                                400                             100

Total Current Liabilities                                                            $ 4,400                        $3,200

Long-term debt                                                                        200                              0

Total Liabilities                                                                        $ 4,600                        $3,200

Common stock ($1par) and additional paid-in capital                 9,900                          7,300

Retained earnings                                                                     4,000                           (2,200)

Total Liabilities and Equity                                                       $18,500                       $8,300   

Income Statement for 2016

Sales                                                                                                                            $94 000

Cost of goods sold                                                                                                       55 000

Gross profit                                                                                                                  $39,000

Selling and administrative                                                         28,800

Depreciation                                                                            500                              29,300

Operating profit                                                                                                            $ 9,700 I

interest expense                                                                                                           100

Earnings before tax                                                                                                      $ 9 600

Tax expense                                                                                                                 3 400

Net income                                                                                                                  $ 6,200

Explanation / Answer

Cash Flow Statement - Indirect Method Cash flow from operations Net Income 9600 Add: Depriciation 500 Increase in accounts payable 800 Increase in accrued liabilities 100 1400 Less: Increase in accounts receivable 500 Increase in inventory 6900 Income tax paid 3100 10500 (100 + 3400 - 400) Net cash flow from operations 500 Cash flow from investing activity Purchase of plant & equipment -700 Purchase of long term investments -300 Net cash flow from investing activity -1000 Cash flow from financing activity Proceeds from long term debt 200 Issuing of common stock 2600 Net Cash flow from financing activity 2800 Net Cash flow 2300 Beginning cash balance 1000 Ending cash balance 3300 Net cash flow 2300

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