Frontera Corporation reported the following income statement and comparative balance sheet for the year ended December 31, 2004.

Income Statement (for the Year Ended December 31, 2004)

(In thousands)

Sales revenue ...........$6,930

Cost of goods sold ........ 3,660

Gross profit on sales ......... 3,270

Operating expenses:

Wages ............... 855

Depreciation ............ 102

Rent ................ 546

Advertising ............. 1,224

Operating income ......... 543

Other revenues and expenses:

Interest revenue .......... 84

Interest expense .......... (24)

Income before taxes .......... 603

Income tax expense .......... 210

Net income ............ $ 393

Frontera Corporation used the indirect format to prepare the statement of cash flows, but it has been misplaced and is not available.

Required
Use your knowledge of financial statements to answer each of the questions that follow. For each item you list as part of your answer, describe fully why the item appears on the statement of cash flows.
A. Which line items from the income statement will also be found in the operating activities section of the statement of cash flows?
B. Which line items from the balance sheet contain information that will be reflected in the operating activities section?
C. Which line items from the income statement will also be found in the investing activities section?
D. Which line items from the balance sheet contain information that will be reflected in the investing activities section?
E. Which line items from the income statement will also be found in the financing activities section?
F. Which line items from the balance sheet contain information that will be reflected in the financing activitiessection?

Transcribed Image Text:

Balance Sheet (at December 31) Prepaid advertising 2 0 Buildings and equipment Accumulated depreciation Investments, long-term 3 Liabilities and stockholders' equity: Wages payable Total current liabilities Notes payable, long-term Total liabilities and equity