At December 31 Assets Cash Accounts receivable, net Inventory Total current assets MONTGOMERY INCORPORATED Comparative Balance Sheets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable Salaries payable Total current liabilities Equity Common stock, no par value Retained earnings Total liabilities and equity MONTGOMERY INCORPORATED Income Statement For Current Year Ended December 31 $ 54,000 (22,400) 31,600 6,700 8,700 Sales Cost of goods sold Gross profit Salaries expense Depreciation expense Income before taxes Income tax expense Net income 16, 200 3,900 $ 12,300 Current Year Prior Year $ 55,600 12,500 112,100 180, 200 62,100 (28,100) $ 214,200 $ 29,900 500 30,400 156,300 27,500 $ 214,200 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $10,800 cash. c. Purchased equipment for cash; no equipment was sold. $ 55,900 15,400 89,000 160,300 52,700 (19,400) $ 193,600 $ 32,200 700 32,900 145,500 15,200 $ 193,600

Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $10,800 cash. c. Purchased equipment for cash; no equipment was sold. MONTGOMERY, INCORPORATED Statement of Cash Flows (Indirect Method) For Current Year Ended December 31 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash used in operating activities: Income statement items not affecting cash Depreciation expense Changes in current operating assets and liabilities Decrease in accounts receivable Increase in inventory Decrease in accounts payable Decrease in salaries payable Cash flows from investing activities Cash paid for equipment Cash flows from financing activities Cash received from stock issuance Net decrease in cash Cash balance at beginning of year Cash balance at end of year