FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260664386
Author: PHILLIPS, LIBB
Publisher: MCG
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Textbook Question
Chapter 12, Problem 4CP
Preparing and Interpreting a Statement of Cash Flows (Indirect Method)
Soft Touch Company was started several years ago by two golf instructors. The company’s comparative balance sheets and income statement are presented below, along with additional information.
Current Year |
Previous Year |
|
Balance Sheet at December 31 | ||
Cash | $13,500 | $ 8,000 |
2,500 | 3,500 | |
Equipment | 11,000 | 10,000 |
Accumulated |
(3,000) | (2,500) |
$24,000 | $19,000 | |
Accounts Payable | $ 1,000 | $ 2,000 |
Salaries and Wages Payable | 1,000 | 1,500 |
Note Payable (long-term) | 3,000 | 1,000 |
Common Stock | 10,000 | 10,000 |
9,000 | 4,500 | |
$24,000 | $19,000 | |
Income Statement | ||
Service Revenue | $75,000 | |
Salaries and Wages Expense | 68,000 | |
Depreciation Expense | 500 | |
Income Tax Expense | 2,000 | |
Net Income | $ 4,500 |
Additional Data:
- a. Bought new golf clubs using cash, $1,000.
- b. Borrowed $2,000 cash from the bank during the year.
- c. Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that Income Tax Expense was fully paid in cash.
Required:
- 1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method.
- 2. Use the statement of cash flows to evaluate the company’s cash flows.
TIP: Demonstration Case A provides an example of information to consider when evaluating cash flows.
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Check out a sample textbook solutionChapter 12 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 12 - Compare the purposes of the income statement, the...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - What are the major categories of business...Ch. 12 - Prob. 5QCh. 12 - Describe the types of items used to compute cash...Ch. 12 - Under the indirect method, depreciation expense is...Ch. 12 - Prob. 8QCh. 12 - Explain why a 50,000 increase in inventory during...Ch. 12 - Prob. 10Q
Ch. 12 - As a junior analyst, you are evaluating the...Ch. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - Prob. 14QCh. 12 - (Supplement 12A) How is the sale of equipment...Ch. 12 - Prob. 1MCCh. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Prob. 4MCCh. 12 - Which of the following would not appear in the...Ch. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - The total change in cash as shown near the bottom...Ch. 12 - Prob. 10MCCh. 12 - Prob. 1MECh. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Determining the Effects of Account Changes on Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 5MECh. 12 - Computing Cash Flows from Investing Activities...Ch. 12 - Computing Cash Flows from Financing Activities...Ch. 12 - Computing Cash Flows Under IFRS Using the data...Ch. 12 - Prob. 9MECh. 12 - Interpreting Cash Flows from Operating, Investing,...Ch. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 13MECh. 12 - Matching items Reported to Cash Flow Statement...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Reporting and Interpreting Cash Flows from...Ch. 12 - Prob. 10ECh. 12 - Prob. 11ECh. 12 - Inferring Balance Sheet Changes from the Cash Flow...Ch. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Prob. 17ECh. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 21ECh. 12 - Prob. 22ECh. 12 - (Supplement 12B) Preparing a Statement of Cash...Ch. 12 - Determining Cash Flow Statement Effects of...Ch. 12 - Prob. 2CPCh. 12 - Prob. 3CPCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5CPCh. 12 - Prob. 6CPCh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PACh. 12 - Prob. 2PACh. 12 - Prob. 3PACh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 6PACh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PBCh. 12 - Prob. 2PBCh. 12 - Prob. 3PBCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5PBCh. 12 - Prob. 6PBCh. 12 - Prob. 1SDCCh. 12 - Prob. 2SDCCh. 12 - Prob. 6SDCCh. 12 - Prob. 7SDCCh. 12 - Prob. 8SDCCh. 12 - Prob. 9SDCCh. 12 - Prob. 1CC
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