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PA12-3 Preparing a Statement of Cash Flows (Indirect Method) [LO2, LO3, LO4, LO5]

XS Supply Company is developing its annual financial statements at December 31, 2017. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

	2017			2016
Balance Sheet at December 31
Cash	$	40,380		$	38,300
Accounts Receivable		41,200			31,000
Merchandise Inventory		44,800			39,700
Property and Equipment		132,000			108,000
Less: Accumulated Depreciation		(35,650	)		(27,000	)
	$	222,730		$	190,000
Accounts Payable	$	41,050		$	28,900
Wages Payable		3,810			4,200
Note Payable, LongTerm		35,600			49,600
Contributed Capital		97,800			74,600
Retained Earnings		44,470			32,700
	$	222,730		$	190,000
Income Statement for 2017
Sales	$	141,000
Cost of Goods Sold		81,780
Other Expenses		47,450
Net Income	$	11,770

Additional Data:

1. Bought equipment for cash, $24,000.
2. Paid $14,000 on the long-term note payable.
3. Issued new shares for $23,200 cash.
4. No dividends were declared or paid.
5. Other expenses included depreciation, $8,650; wages, $22,200; taxes, $9,300; other, $7,300.
6. Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required: 1. Prepare the statement of cash flows for the year ended December 31, 2017, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

XS SUPPLY COMPANY Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: 11,770 Decrease in wages payable Depreciation expense Increase in accounts payable Increase in merchandise inventory Increase in accounts receivable (390) 8,650 12,150 (5,100) (10,200) 5,110 16,880 Cash flows from investing activities: Cash payments to purchase equipment (24,000) (24,000) Cash flows from financing activities: Cash payments on long-term note Cash receipts from issuing shares (14,000) 23,200 Net increase in cash during the year Cash balance, January 1, 2017 Cash balance, December 31, 2017 9,200 2,080 38,300 40,380