Chapter 23, Problem 14E

To determine

Statement of cash flows: It represents net cash flow available after taking into consideration operating, financing, and investing expenses for a given financial year.

Indirect method: Indirect method is most widely used method to compute cash (used) provided by operating activities. Under this method net cash flow is determined by adding back noncash expense and losses to net income and deducting all noncash income and gains from net income.

Given Information:

Comparative Balance sheet as on December 31	2017 ($)	2016 ($)
Cash	6,000	7,000
Receivables	62,000	51,000
Short-term investments (available-for-sale)	35,000	18,000
Inventory	40,000	60,000
Prepaid rent	5,000	4,000
Equipment	154,000	130,000
Accumulated depreciation	(35,000)	(25,000)
Copy Rights	46,000	50,000
Total Assets	313,000	295,000
Accounts payable	46,000	40,000
Income Tax payable	4,000	6,000
Salaries and wages payable	8,000	4,000
Short-term loans payable	8,000	10,000
Long-term loans payable	60,000	69,000
Common stock $10 par	100,000	100,000
Contributed capital, common stock	30,000	30,000
Retained earnings	57,000	36,000
Total Liabilities and Stockholders’ Equity	313,000	295,000

To determine the statement of cash flows (Indirect method).