Kates Cards Chapter 12

SERIAL PROBLEM:KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 11.) SP12. Kate has just completed her first year running Kate's Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate's Cards. Additional information: 1. There was no disposals of equipment during the year. 2. Dividends in the amount of $1,300 were paid in cash during the year 3. Prepaid expenses relate to operating expenses. Required a. Prepare a statement of cash flows for Kate's Cards for the year ended August 31, 2016, using the indirect method. Hint: Since this was Kate's first year of operations, the beginning balance sheet account balances were zero. Prepare a statement of cash flows for Kate's Cards for the year ended August 31, 2016, using the direct method. (Appendix 12A) b. Chapter 12 Statement of Cash Flows Year t31, $135,000 72,000 63,000 Wages nsurance.. 18,000 11,850 1,200 Total operating expenses. income from operations ..3.250 Income before income tax 25,400 8,900 $ 16,500 KATE'S CARDS Balance Sheet As of August 31, 2016 Assets Current assets $12,300 11,000 16,000 1,000 Inventory Prepaid insurance Total current assets. Equipment 17,500 Total assets Liabilities Current liabilities .. $ 6,200 1,250 1,900 Unearned revenue Other current liabilities. Total current liabilities Note payable . .. 15,000 Stockholders' equity Common stock Additional paid-in-capital 5,000 Retained earnings Total liabilities and stockholders' equity