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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 $ 53,100 Accounts receivable, net 18,300 Inventory 164,000 Total current assets 235,400 Equipment 90,800 Accum. depreciation-Equipment (41,000) Total assets $285,200 Liabilities and Equity Accounts payable $ 43,500 Salaries payable 700 Total current liabilities 44,200 Equity Common stock, no par value 208,600 Retained earnings 32,400 Total liabilities and equity $285,200 $ 53,400 22,700 131,300 207,400 77,600 (28,600) $256,400 $ 47,600 800 48,400 190,600 17,400 $256,400 MONTGOMERY INC. Income Statement For Current Year Ended December 31 Sales $ 65,300 Cost of goods sold (27,100) Gross profit 38,200 Operating expenses Depreciation expense $ 12,400 Other expenses 8,100 Total operating expense 20,500 Income before taxes 17,700 Income tax expense 2,700 Net income $ 15,000 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $18,000 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 15,000 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Depreciation expense 12,400 Decrease in accounts receivable 4,4001 Changes in current operating assets and liabilities Increase in inventory (32,700) Decrease in accounts payable (4.100) Decrease in salaries payable (100) $ (5,100) Cash flows from investing activities Cash paid for equipment Cash received from stock issuance 18,000 18,000 $ 36,000 Cash flows from financing activities Cash paid for equipment 53,4001 $ $ 53,400 84,300 Cash balance at beginning of year Cash balance at end of year $ 84,300