Suppose the income statement for Goggle Company reports $95 of net income, after deducting depreciation of $35. The company bought equipment costing $60 and obtained a long-term bank loan for $70. The company’s comparative balance sheet, at December 31, is presented on the following page.

1. Calculate the change in each balance sheet account, and indicate whether each account relates to operating, investing, and/or financing activities.
2. Prepare a statement of cash flows using the indirect method.
3. In one sentence, explain why an increase in accounts receivable is subtracted.
4. In one sentence, explain why a decrease in inventory is added.
5. In one sentence, explain why an increase in wages payable is added.
6. Are the cash flows typical of a start-up, healthy, or troubled company?Explain.

  • CreatedFebruary 27, 2015
  • Files Included
Post your question