The balance sheets for a company, along with additional information, are provided below: Balance Sheets December 31, 2021 and 2020 2021 2020 Assets Current assets: Cash $ 107,800 $ 118,100 Accounts receivable 80,000 100,000 5,000 94,500 84,500 2,500 Inventory Prepaid rent Long-term assets: Land 505,000 810,000 (433,000) $1,174,800 505,000 695,000 (278,000) $1,221,600 Equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: $ 104,000 Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: 6,300 9,000 89,500 12,600 5,500 105,000 210,000 725,000 179,000 $1,221,600 Common stock 725,000 Retained earnings 225,500 $1,174,800 Total liabilities and stockholders' equity Additional Information for 2021: 1. Net income is $74,000. 2. The company purchases $115,000 in equipment. 3. Depreciation expense is $155,000. 4. The company repays $105,000 in notes payable.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Preparation of the Statement of Cash Flows Using the Indirect Method

**Note:** List cash outflows and any decrease in cash as negative amounts.

---

### Statement of Cash Flows
**For the Year Ended December 31, 2021**

#### Cash Flows from Operating Activities
1. **Adjustments to reconcile net income to net cash flows from operating activities:**
   - (Field for adjustment 1) 
   - (Field for adjustment 2) 
   - (Field for adjustment 3) 
   - (Field for adjustment 4) 
   - (Field for adjustment 5) 
   - (Field for adjustment 6) 
   - (Field for adjustment 7) 
   - (Field for adjustment 8) 
   - (Field for adjustment 9) 
   - (Field for adjustment 10)

2. **Net cash flows from operating activities:** $0

#### Cash Flows from Investing Activities
1. (Field for activity 1)
2. (Field for activity 2)
3. (Field for activity 3)
4. (Field for activity 4)

**Net cash flows from investing activities:** $0

#### Cash Flows from Financing Activities
1. (Field for activity 1)
2. (Field for activity 2)
3. (Field for activity 3)
4. (Field for activity 4)
 
**Net cash flows from financing activities:** $0

#### Cash at the Beginning of the Period
- (Field for cash at the beginning)

#### Cash at the End of the Period
- $0

---

**Explanation of the Fields in the Diagram:**

- Each section (Operating Activities, Investing Activities, Financing Activities) contains fields where line items or adjustments specific to that category would be added.
- After listing all relevant items, the result is summed up to display the net cash flow for each activity (Operating, Investing, Financing).
- Finally, a reconciliation of the cash position at the beginning and the end of the period is provided to show the final cash position.

This templated structure follows the indirect method of preparing the statement of cash flows, starting with net income (reconciled through adjustments) to arrive at net cash flows from operating activities, and then adjusting for the cash flows from investing and financing activities.
Transcribed Image Text:### Preparation of the Statement of Cash Flows Using the Indirect Method **Note:** List cash outflows and any decrease in cash as negative amounts. --- ### Statement of Cash Flows **For the Year Ended December 31, 2021** #### Cash Flows from Operating Activities 1. **Adjustments to reconcile net income to net cash flows from operating activities:** - (Field for adjustment 1) - (Field for adjustment 2) - (Field for adjustment 3) - (Field for adjustment 4) - (Field for adjustment 5) - (Field for adjustment 6) - (Field for adjustment 7) - (Field for adjustment 8) - (Field for adjustment 9) - (Field for adjustment 10) 2. **Net cash flows from operating activities:** $0 #### Cash Flows from Investing Activities 1. (Field for activity 1) 2. (Field for activity 2) 3. (Field for activity 3) 4. (Field for activity 4) **Net cash flows from investing activities:** $0 #### Cash Flows from Financing Activities 1. (Field for activity 1) 2. (Field for activity 2) 3. (Field for activity 3) 4. (Field for activity 4) **Net cash flows from financing activities:** $0 #### Cash at the Beginning of the Period - (Field for cash at the beginning) #### Cash at the End of the Period - $0 --- **Explanation of the Fields in the Diagram:** - Each section (Operating Activities, Investing Activities, Financing Activities) contains fields where line items or adjustments specific to that category would be added. - After listing all relevant items, the result is summed up to display the net cash flow for each activity (Operating, Investing, Financing). - Finally, a reconciliation of the cash position at the beginning and the end of the period is provided to show the final cash position. This templated structure follows the indirect method of preparing the statement of cash flows, starting with net income (reconciled through adjustments) to arrive at net cash flows from operating activities, and then adjusting for the cash flows from investing and financing activities.
### Company Balance Sheets and Additional Information

#### Balance Sheets
**For the Years Ended December 31, 2021 and 2020**
(Amounts in Dollars)

| **Assets**                          | **2021**       | **2020**       |
|-----------------------------------|-------------|-------------|
| **Current assets:**                |             |             |
| Cash                              | $107,800    | $118,100    |
| Accounts receivable               | 80,000      | 94,500      |
| Inventory                         | 100,000     | 84,500      |
| Prepaid rent                      | 5,000       | 2,500       |
| **Long-term assets:**             |             |             |
| Land                              | 505,000     | 505,000     |
| Equipment                         | 810,000     | 695,000     |
| Accumulated depreciation          | (433,000)   | (278,000)   |
| **Total assets**                  | **$1,174,800** | **$1,221,600** |

| **Liabilities and Stockholders' Equity** |   |   |
|-----------------------------------------|---------------|-----------------|
| **Current liabilities:**                |               |                 |
| Accounts payable                        | $104,000      | $89,500         |
| Interest payable                        | 6,300         | 12,600          |
| Income tax payable                      | 9,000         | 5,500           |
| **Long-term liabilities:**              |               |                 |
| Notes payable                           | 105,000       | 210,000         |
| **Stockholders' equity:**               |               |                 |
| Common stock                            | 725,000       | 725,000         |
| Retained earnings                       | 225,500       | 179,000         |
| **Total liabilities and stockholders' equity** | **$1,174,800** | **$1,221,600** |

#### Additional Information for 2021:

1. **Net income is $74,000.**
2. **The company purchases $115,000 in equipment.**
3. **Depreciation expense is $155,000.**
4. **The company repays $105,000 in notes payable.**

This balance sheet provides a detailed summary of a company's assets, liabilities
Transcribed Image Text:### Company Balance Sheets and Additional Information #### Balance Sheets **For the Years Ended December 31, 2021 and 2020** (Amounts in Dollars) | **Assets** | **2021** | **2020** | |-----------------------------------|-------------|-------------| | **Current assets:** | | | | Cash | $107,800 | $118,100 | | Accounts receivable | 80,000 | 94,500 | | Inventory | 100,000 | 84,500 | | Prepaid rent | 5,000 | 2,500 | | **Long-term assets:** | | | | Land | 505,000 | 505,000 | | Equipment | 810,000 | 695,000 | | Accumulated depreciation | (433,000) | (278,000) | | **Total assets** | **$1,174,800** | **$1,221,600** | | **Liabilities and Stockholders' Equity** | | | |-----------------------------------------|---------------|-----------------| | **Current liabilities:** | | | | Accounts payable | $104,000 | $89,500 | | Interest payable | 6,300 | 12,600 | | Income tax payable | 9,000 | 5,500 | | **Long-term liabilities:** | | | | Notes payable | 105,000 | 210,000 | | **Stockholders' equity:** | | | | Common stock | 725,000 | 725,000 | | Retained earnings | 225,500 | 179,000 | | **Total liabilities and stockholders' equity** | **$1,174,800** | **$1,221,600** | #### Additional Information for 2021: 1. **Net income is $74,000.** 2. **The company purchases $115,000 in equipment.** 3. **Depreciation expense is $155,000.** 4. **The company repays $105,000 in notes payable.** This balance sheet provides a detailed summary of a company's assets, liabilities
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