E127 Preparing and Evaluating a Simple Statement of Cash Flo

E12-7 Preparing and Evaluating a Simple Statement of Cash Flows (Indirect Method) [LO 12-1, LO 12-2, LO 12-5) Suppose the income statement for Goggle Company reports $159 of net income, after deducting depreciation of $19. The company bought equipment costing $140 and obtained a long-term bank loan for $144. Required: 1. Calculate the change in each balance sheet account and indicate whether each account relates to activities (+ for increase and for decrease). (Select \"NE\" if there s Year Current Year Change Type Cash 362+ 207 151 720 (48) 311 Cash 116Operating 189 Operating 140 51 $ 91 Accumulated De (29) Total $1,033$1392 Salaries and Wage 26 S 82S6 Operating 461 26 NE Common Stock Retained Earnings 520 679 159 Total $ 1,0331,392 Prepare a statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) 2.

Solution

1) Previous Year Current Year Change Type Cash $ 51 $ 362 + $            311 Cash Accounts receivable $ 91 $ 207 + $            116 Operating Inventory $ 340 $ 151 - $            189 Operating Equipment $ 580 $ 720 + $            140 Investing Accumulated Depreciation-Equipment $ -29 $ -48 - $ 19 Operating Total $ 1,033 $ 1,392 Salaries and wages payable $ 26 $ 82 + $ 56 Operating Notes Payable (Long term) $ 461 $ 605 + $ 144 Financing Common Stock $ 26 $ 26 NE 0 Retained Earning $ 520 $ 679 + $            159 Operating Total $ 1,033 $             1,392 Change in retained earning is due to Net Income.So,it is classified under Operating Section. 2) GOGGLE COMPANY Statement of Cash flows For the Year Ended December 31 Cash flows from Operating Activities: Net Income $ 159 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation $                   19 Change in Current Assets and Current Liabilities: Increase in Accounts Receivable $               -116 Decrease in Inventory $                 189 Increase in salaries and wages payable $                   56 Net Cash provided by Operating Activities $                 307 Cash flow from investing activities: Equipment Purchased $               -140 Net Cash used by Investing Activities $               -140 Cash flow from Financing Activities: Obtained Bank Loan $                 144 Net Cash provided by Financing Activities $                 144 Net Cash flow for the year $                 311 Cash at the beginning of Year $                   51 Cash at the end of the year $                 362