50.1K

Verified Solution

Link Copied!

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we will prepare the statement of cash flows using the following financial data.)

BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2016
Computer services revenue				$	24,707
Net sales					17,993
Total revenue					42,700
Cost of goods sold	$	15,052
Depreciation expenseOffice equipment		330
Depreciation expenseComputer equipment		1,240
Wages expense		2,350
Insurance expense		505
Rent expense		1,675
Computer supplies expense		1,295
Advertising expense		600
Mileage expense		250
Repairs expenseComputer		940
Total expenses					24,237
Net income				$	18,463

BUSINESS SOLUTIONS
Comparative Balance Sheets
December 31, 2015, and March 31, 2016
	Mar. 31, 2016				Dec. 31, 2015
Assets
Cash	$	82,587			$	57,892
Accounts receivable		24,367				5,268
Inventory		614				0
Computer supplies		2,095				530
Prepaid insurance		1,020				1,625
Prepaid rent		745				745
Total current assets		111,428				66,060
Office equipment		7,400				7,400
Accumulated depreciationOffice equipment		(660	)			(330	)
Computer equipment		19,700				19,700
Accumulated depreciationComputer equipment		(2,480	)			(1,240	)
Total assets	$	135,388			$	91,590
Liabilities and Equity
Accounts payable	$	0			$	1,200
Wages payable		965				530
Unearned computer service revenue		0				2,300
Total current liabilities		965				4,030
Equity
Common stock		113,000				80,000
Retained earnings		21,423				7,560
Total liabilities and equity	$	135,388			$	91,590

Required:

Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2016. Recall that the owner Santana Rey contributed $33,000 to the business in exchange for additional stock in the first quarter of 2016 and has received $4,600 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

Answer & Explanation Solved by verified expert

See Answer