P12-1 (Algo) Preparing a Statement of Cash Flows (Indirect Method) LO12-1, 12-2, 12-4, 12-6 Sharp Screen Films, Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Balance sheet at December 31 Current Year Prior Year Cash $ 66,950 Accounts receivable $ 66,000 18,450 25, 150 Merchandise inventory 25,150 19,600 Property and equipment 212,850 152,800 Less: Accumulated depreciation (62,000) (47,250) $261,400 $216,300 Accounts payable $ 12,200 $ 22,400 Wages payable 4,700 5,300 Note payable, long-term 62,500 75,500 Common stock and additional paid-in capital 102,500 67,200 Retained earnings 79,500 45,900 $261,400 $216, 300 Income statement for current year Sales $208,000 Cost of goods sold 105,000 Depreciation expense 14,750 Other expenses 44,300 Net income $ 43,950 Additional Data: a. Bought equipment for cash, $60,050. b. Paid $13,000 on the long-term note payable. c. Issued new shares of stock for $35,300 cash. d. Dividends of $10,350 were declared and paid. e. Other expenses all relate to wages. f. Accounts payable includes only inventory purchases made on credit. Ninyt $ 43,950 SHARP SCREEN FILMS, INC. Statement of Cash Flows For the Year Ended December 31, Current Year Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 14,750 Decrease in accounts receivable Increase in merchandise inventory Decrease in accounts payable Decrease in wages payable 14,750 58,700 Cash flows from investing activities: Cash payments to purchase property and equipment 60,050 X 60,050 Net cash used in investing activities Cash flows from financing activities: Cash payments on long-term note Cash payments for dividends Cash receipts from issuing stock >>> 13,000 10,350 X 35,300 58,650 X Net cash provided by financing activities Net decrease in cash during the year Cash balance, January 1, current year Cash balance, December 31, current year 66,000 66,000