2017 MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017 2018 Assets Cash $ 54,100 Accounts receivable, net 13,400 Inventory 120,100 Total current assets 187,600 Equipment 66,500 Accum. depreciation-Equipment (30,100) Total assets $224,000 Liabilities and Equity Accounts payable $ 32,000 Salaries payable 600 Total current liabilities 32,600 Equity Common stock, no par value 159,800 Retained earnings 31,600 Total liabilities and equity $224,000 $ 54,200 16,400 94,800 165,400 56,100 (20,700). $200,800 $ 34,400 800 35,200 148,200 17,400 $200,800 MONTGOMERY INC. Income Statement For Year Ended December 31, 2018 Sales $ 60,900 Cost of goods sold (25,300) Gross profit 35,600 Operating expenses Depreciation expense $ 9,400 Other expenses 7,500 Total operating expense 16,900 Income before taxes 18,700 Income tax expense 4,500 $ 9,400 7,500 Depreciation expense Other expenses Total operating expense Income before taxes Income tax expense Net income 16,900 18,700 4,500 $ 14,200 Additional Information a. No dividends are declared or paid in 2018. b. Issued additional stock for $11,600 cash in 2018. c. Purchased equipment for cash in 2018; no equipment was sold in 2018 1. Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2018, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) MONTGOMERY, INC. Statement of Cash Flows (Indirect Method) For Year Ended December 31, 2018 Cash flows from operating activities Net income $ 14,200 Adjustments to reconcile net income to net cash provided by operations: Changes in current operating assets and liabilities Depreciation expense 9,400 Decrease in accounts receivable 3,000 Increase in inventory (25,300) Statement of Cash Flows (Indirect Method) For Year Ended December 31, 2018 Cash flows from operating activities Net income 14,200 Adjustments to reconcile net income to net cash provided by operations: Changes in current operating assets and liabilities Depreciation expense 9,400 Decrease in accounts receivable 3,000 Increase in inventory (25,300) Decrease in accounts payable (2,400) Decrease in salaries payable (200) $ (1,300) Cash flows from investing activities Cash flows from financing activities $ (1,300) Cash balance at beginning of year Cash balance at end of year $ (1,300)