MONTGOMERY INCORPORATED
Comparative Balance Sheets
At December 31	Current Year	Prior Year
Assets
Cash	$ 54,100	$ 54,200
Accounts receivable, net	13,400	16,400
Inventory	120,100	94,800
Total current assets	187,600	165,400
Equipment	66,500	56,100
Accumulated depreciationEquipment	(30,100)	(20,700)
Total assets	$ 224,000	$ 200,800
Liabilities and Equity
Accounts payable	$ 32,000	$ 34,400
Salaries payable	600	800
Total current liabilities	32,600	35,200
Equity
Common stock, no par value	159,800	148,200
Retained earnings	31,600	17,400
Total liabilities and equity	$ 224,000	$ 200,800

MONTGOMERY INCORPORATED
Income Statement
For Current Year Ended December 31
Sales	$ 60,900
Cost of goods sold	(25,300)
Gross profit	35,600
Salaries expense	7,500
Depreciation expense	9,400
Income before taxes	18,700
Income tax expense	4,500
Net income	$ 14,200

Additional Information on Current-Year Transactions

No dividends are declared or paid.

Issued additional stock for $11,600 cash.

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, INCORPORATED
Statement of Cash Flows (Indirect Method)
For Current Year Ended December 31
Cash flows from operating activities
Net income	$14,200
Adjustments to reconcile net income to net cash used in operating activities:
Income statement items not affecting cash
Depreciation expense	9,400
Changes in current operating assets and liabilities
Decrease in accounts receivable	3,000
Increase in inventory	(25,300)
Decrease in salaries payable	(200)
Decrease in accounts payable	(2,400)
		$(1,300)
Cash flows from investing activities
Cash paid for equipment	(10,400)
		$(10,400)
Cash flows from financing activities
Cash received from stock issuance	11,600
		$11,600
Net increase in cash		$(100)
Cash balance at beginning of year		54,200
Cash balance at end of year		$