MONTGOMERY INCORPORATED Comparative Balance Sheets Current Year Prior Year At December 31 Assets Cash $ 30,800 8,900 79,800 119,500 44,200 (19,900) $ 143,800 $ 31,000 10,900 63,000 104,900 37,300 (13,800) $ 128,400 Accounts receivable, net Inventory Total current assets 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 $ 21,200 400 21,600 $ 22,900 500 23,400 102,400 19,800 $ 143,800 94,100 10,900 $ 128,400 MONTGOMERY INCORPORATED Income Statement For Current Year Ended December 31 Sales $ 38,500 Cost of goods sold (16,000) Gross profit 22,500 Salaries expense 4,700 Depreciation expense 6,100 Income before taxes 11,700 Income tax expense Net income $ 8,900 2,800 Additional Information on Current-Year Transactions a. No dividends are declared or paid. b. Issued additional stock for $8,300 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, 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 $ 8,900 6,100 Changes in current operating assets and liabilities Decrease in accounts receivable Decrease in inventory Decrease in accounts payable Decrease in salaries payable (2,000) (16,800) (1,700) (100) $ (5,600) Cash flows from investing activities Cash paid for equipment (6,900) $ (6,900) Cash flows from financing activities Cash received from stock issuance 8,300 $ 8,300 $ (4,200) Cash balance at beginning of year Cash balance at end of year $ (4,200)