Exercise 12-12 Indirect: Preparing statement of cash flows LO P2, P3 Prior Year MONTGOMERY INC. Comparative Balance Sheets December 31 Current Year Assets Cash $ 78,500 Accounts receivable, net 16,700 Inventory 149,700 Total current assets 244,900 Equipment 82,900 Accum. depreciation Equipment (37,500) Total assets $ 290,300 Liabilities and Equity Accounts payable $ 39,900 Salaries payable 700 Total current liabilities 40,600 Equity Common stock, no par value 210,200 Retained earnings 39,500 Total liabilities and equity $290,300 $ 78,600 20,400 117,900 216,900 69,800 (25,700) $261,000 $ 42,700 1,000 43,700 195,500 21,800 $261,000 MONTGOMERY INC. Income Statement For Current Year Ended December 31 Sales $ 76,100 Cost of goods sold (31,600) Gross profit 44,500 Operating expenses Depreciation expense $11,800 Other expenses 9,400 Total operating expense 21,200 Income before taxes Income tax expense 5,600 Net income $ 17,700 23,300 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $14,700 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.) 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 S 17,700 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Depreciation expense 11,800 5,600 Changes in current operating assets and liabilities Decrease in accounts receivable Increase in inventory Decrease in salaries payable Increase in accounts payable S 35,100 Cash flows from investing activities S S 0 Cash flows from financing activities 0 199 35,100 Cash balance at beginning of year Cash balance at end of year S 35,100