Section C: Case Study Cash Flow Statement (Indirect Method)

Construct the statement of cash flows for Delta Co, using the information provided in the companys financial statements below:

• Delta Co. is financed by both long-term debt and common equity.
• The firms operating profit for the year was $199,000 and the applicable corporate tax rate was 40%.
• The firms net income is $ 114,000

Income Statement

for the year ended 30 June 2018

Sales 1,180,000

Cost of goods sold ( 790,000)

Gross profit 390,000

Selling, general and admin expenses ( 184,000)

EBITDA 206,000

Depreciation ( 7,000)

EBIT 199,000

Interest expense ( 9,000)

EBT 190,000

Income tax expense (40%) ( 76,000)

Net income 114,000

Comparative Balance Sheet

as of 30 June 2018 and 30 June 2017

2018 2017

Assets

Cash 77,000 26,000

Accounts receivable 74,000 65,000

Inventory 132,000 180,000

Land 105,000 80,000

Building 240,000 200,000

Total assets 628,000 551,000

Liabilities and Equity

Accounts payable 43,000 46,000

Notes payable 128,000 14,000

Accruals 45,000 24,000

Long-term debt 110,000 150,000

Capital 61,000 61,000

Retained earnings 241,000 256,000

Total liabilities and equity 628,000 551,000

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