Exercise 12-12 Indirect: Preparing statement of cash flows LO P2, P3 MONTGOMERY INC. Comparative Balance Sheets. Assets Cash Accounts receivable, net Inventory Total current assets Equipment Accum. 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 December 31 Current Year Prior Year $ 38,200 10,800 $ 38,700 13,400 MONTGOMERY INC. Income Statement For Current Year Ended December 31 96,800 77,500 145,800 129,600 53,600 (24,200) $175,200 $ 25,700 400 45,800 (16,900) $158,500 $ 28,100 500 26,100 28,600 129,300 119,000 19,800 10,900 $175,200 $158,500 Sales $ 40,300 Cost of goods sold Gross profit (16,700) 23,600 Operating expenses Depreciation expense $ 7,300 Other expenses Total operating expense Income before taxes. 5,000 12,300 11,300 Income tax expense Net income 2,400 $ 8,900 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $10,300 cash. c. Purchased equipment for cash; no equipment was sold. 1. Use the above information to prepare a statement of cash flows for the current year using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) MONTGOMERY, INC. Statement of Cash Flows (Indirect Method) For Current Year Ended December 31 Cash flows from operating activities Net income $ 8,900 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Depreciation expense Changes in current operating assets and liabilities Depreciation expense Decrease in accounts receivable Decrease in accounts payable Increase in salaries payable Decrease in inventory Net cash used in operating activities Cash flows from investing activities Cash paid for equipment Net cash used in investing activities Cash flows from financing activities 7,300 2,600 2,400 100 (19,300) $ 2,000 (7,800) $ (7,800) Cash received from stock issuance 10,300 Net cash provided by financing activities $ 10,300 Net increase in cash $ 4,500 Cash balance at beginning of year 38,700 Cash balance at end of year $ 43,200