Victor Ortega is the owner of a very successful small company that operates a carry-out pizza parlor. He also prepares his own financial statements. His task today is the completion of his 2011 Statement of Cash Flows. Using the following Condensed Income Statement and Statement of Retained Earnings for 2011, as well as his 2010 and 2011 Balance Sheets, help Victor complete his Statement of Cash Flows for Year Ending 2011. Then, answer the questions that follow:

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ORTEGA’S PIZZA Condensed Income Statement and Statement of Retained Earnings For the Period: January 1 through December 31, 2011 Income Statement Sales $700,000 Cost of Sales 210,000 Gross Profit 490,000 Operating Expenses (excluding depreciation) 388,000 Depreciation 14,000 Operating Income 88,000 Interest 30,000 Income Before Income Taxes — 58,000 Income Taxes (40%) 23,000 Net Income 35,000 Statement of Retained Earnings Retained Earnings, December 31, 2010 50,000 Net Income for 2011 35,000 Subtotal 85,000 Cash Dividends Paid in 2011 20,000 Retained Earnings, December 31,2011. 65,000 ORTEGA’S PIZZA Balance Sheets December 31, 2010 and 2011 2010 2011 t | Sources Uses Assets Current Assets Cash 42,000 30,000 |
Marketable Securities 85,000 91,000 |
Net Receivables 93,000 80,000 |
Inventories 58,000 67,000 | :
Total Current Assets 278,000 268,000 Property and Equipment 965,000 915,000 Less Accumulated Depreciation 40,000 30,000 Net Property and Equipment 925,000 885,000 Total Assets 122030001 5S!000 Liabilities and Owners’ Equity Current Liabilities Accounts Payable 40,000 45,000 Notes Payable 125,000 150,000 |
Accrued Wages 38,000 23,000 | |
Total Current Liabilities 203,000 218,000 Long-Term Liabilities Long-Term Debt 500,000 —3_0 0,000 f ee mee Total Liabilities 703,000 518,000 Owners’ Equity Common Stock 75,000 95,000 Paid in Capital 375,000 475,000 Retained Earnings 50,000 65,000 Total Owners’ Equity 500,000 635,000 Total Liabilities and Owners’ 1,203,000 1,153,000 Equity Total Sources and Uses of Funds ORTEGA’S PIZZA Statement of Cash Flows December 31, 2011 Net Cash Flow from Operating Activities Net Income Adjustments to reconcile net income to net cash flows from operating activities Depreciation Decrease in Net Receivables Increase in Inventories Increase in Accounts Payable Decrease in Accrued Wages Net Cash Flow from Operating Activities Net Cash Flow from Investing Activities Increase in Marketable Securities Decrease in Property and Equipment Net Cash Flow from Investing Activities Net Cash Flow from Financing Activities Increase in Notes Payable Decrease in Long-Term Debt Increase in Capital Stock (Common Stock + Paid in Capital)
Dividends Paid Net Cash Flow from Financing Activities Net Decrease in Cash during 2011 Cash at the beginning of 2011 Cash at the end of 2011 Supplementary Disclosure of Cash Flow Information Cash paid during the year for Interest Income Taxes Did the change in “Inventories” reflect a Source or a Use of funds? What was the amount of that change?
. Did the change in “Long-Term Debt” reflect a Source or a Use of funds? What was the amount of that change?
. What is Victor's proper entry for “Net Cash Flow from Operating Activities”?
. What is Victor's proper entry for “Net Cash Flow from Investing Activities”?
. What is Victor's proper entry for “Net Cash Flow from Financing Activities”?