10.

MONTGOMERY INCORPORATED Comparative Balance Sheets At December 31 Current Year Prior Year Assets Cash $ 78,500 $ 78,600 Accounts receivable, net 16,700 20,400 Inventory 149,700 117,900 Total current assets 244,900 216,900 Equipment 82,900 69,800 Accumulated depreciation-Equipment (37,500) (25,700) Total assets $ 290, 300 $ 261,000 Liabilities and Equity Accounts payable $ 39,900 $ 42,700 Salaries payable 700 1,000 Total current liabilities 40,600 43,700 Equity Common stock, no par value 210,200 195,500 Retained earnings 39,500 21,800 Total liabilities and equity $ 290,300 $ 261,000 MONTCOMERY INCORPORATED Income Statement For Current Year Ended December 31 Sales $ 76,100 Cost of goods sold (31,600) Gross profit 44,500 Salaries expense 9,400 Depreciation expense 11,800 Income before taxes 23,300 Income tax expense 5,600 Net income $ 17,700 Additional Information on Current-Year Transactions Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $14,700 cash. c. Purchased equipment for cash; no equipment was sold. 1. Use the above information to prepare a statement of cash flows for the current year using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) MONTGOMERY, INCORPORATED Statement of Cash Flows (Indirect Method) For Current Year Ended December 31 Cash flows from operating activities Adjustments to reconcile net income to net cash used in operating activities: Income statement items not affecting cash Changes in current operating assets and liabilities Cash flows from investing activities Cash flows from financing activities Cash balance at beginning of year Cash balance at end of year