Problem 23-4 Indigo Company had the following information available at the end of 2017. INDIGOCOMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 2017 2016 Cash $10,090 $3,980 Accounts receivable 20,320 12,920 Short-term investments 21,970 29,850 Inventory 41,660 34,950 Prepaid rent 3,020 11,990 Prepaid insurance 2,100 90 Supplies 1,010 Land 123,940 175,430 Buildings 346,530 346,530 Accumulated depreciation-buildings (104,430) (87,260 ) Equipment 527,070 402,150 Accumulated depreciation-equipment (131,260 ) (111,670 ) Patents 44,900 50,370 Total assets $906,920 $869,405 75 Accounts payable Income taxes payable Salaries and wages payable Short-term notes payable Long-term notes payable Bonds payable Premium on bonds payable Common stock Paid-in capital in excess of par-common stock Retained earnings Total liabilities and stockholders' equity $21,940 5,030 5,000 10,010 59,560 397,360 21,860 237,890 $32,020 3,960 2,980 10,010 70,180 397,360 25,065 220,760 123,430 89,600 INDIGO COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue Cost of goods sold $1,160,530 747,740 412,790 $78,510 155,480 42,230 276,220 136,570 Gross margin Operating expenses Selling expenses Administrative expenses Depreciation/Amortization expense Total operating expenses Income from operations Other revenues/expenses Gain on sale of land Gain on sale of short-term investment Dividend revenue Interest expense Income before taxes Income tax expense Net income Dividends to common stockholders To retained earnings 8,080 3,960 2,380 (51,950 ) (37,530) 99,040 39,610 59,430 (25,600 ) $33,830 Prepare a statement of cash flows for Indigo Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) INDIGO COMPANY Statement of Cash Flows (Direct Method) Cash receipts: Cash payments: Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Reconciliation Schedule Reconciliation of Net Income to Adjustments to reconcile net income to Problem 23-4 Indigo Company had the following information available at the end of 2017. INDIGOCOMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 2017 2016 Cash $10,090 $3,980 Accounts receivable 20,320 12,920 Short-term investments 21,970 29,850 Inventory 41,660 34,950 Prepaid rent 3,020 11,990 Prepaid insurance 2,100 90 Supplies 1,010 Land 123,940 175,430 Buildings 346,530 346,530 Accumulated depreciation-buildings (104,430) (87,260 ) Equipment 527,070 402,150 Accumulated depreciation-equipment (131,260 ) (111,670 ) Patents 44,900 50,370 Total assets $906,920 $869,405 75 Accounts payable Income taxes payable Salaries and wages payable Short-term notes payable Long-term notes payable Bonds payable Premium on bonds payable Common stock Paid-in capital in excess of par-common stock Retained earnings Total liabilities and stockholders' equity $21,940 5,030 5,000 10,010 59,560 397,360 21,860 237,890 $32,020 3,960 2,980 10,010 70,180 397,360 25,065 220,760 123,430 89,600 INDIGO COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue Cost of goods sold $1,160,530 747,740 412,790 $78,510 155,480 42,230 276,220 136,570 Gross margin Operating expenses Selling expenses Administrative expenses Depreciation/Amortization expense Total operating expenses Income from operations Other revenues/expenses Gain on sale of land Gain on sale of short-term investment Dividend revenue Interest expense Income before taxes Income tax expense Net income Dividends to common stockholders To retained earnings 8,080 3,960 2,380 (51,950 ) (37,530) 99,040 39,610 59,430 (25,600 ) $33,830 Prepare a statement of cash flows for Indigo Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) INDIGO COMPANY Statement of Cash Flows (Direct Method) Cash receipts: Cash payments: Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Reconciliation Schedule Reconciliation of Net Income to Adjustments to reconcile net income to