Problem I (20 points)

Smith Industries, Inc.

Income Statement

For the Year Ended December 31, 2018

($ in thousands)

Sales revenue

$ 14,250

Service revenue

3,400

Total revenue

$ 17,650

Operating expenses:

Cost of goods sold

7,200

Selling

2,400

General and administrative

1,500

Total operating expenses

11,100

Operating income

6,550

Interest expense

200

Income before income taxes

6,350

Income tax expense

2,500

Net income

$3,850

Balance Sheet Information($ in thousands)

Dec. 31, 2018

Dec. 31, 2017

Assets:

Cash

$7,350

$2,200

Accounts receivable

2,500

2,200

Inventory

4,000

3,000

Prepaid rent

150

300

Plant and equipment

14,500

12,000

Less: Accumulated depreciation

(5,100)

(4,500)

Total assets

$23,400

$15,200

Liabilities and shareholders' equity:

Accounts payable

$1,400

$1,100

Interest payable

100

0

Deferred service revenue

800

600

Income taxes payable

550

800

Loan payable (due 12/31/2020)

5,000

0

Common stock

10,000

10,000

Retained earnings

5,550

2,700

Total liabilities and shareholders' equity

$23,400

$ 15,200

Additional information for the 2018 fiscal year($ in thousands):

1.Cash dividends of $1,000 were declared and paid.

2.Equipment costing $4,000 was purchased with cash.

3.Equipment with a book value of $500 (cost of $1,500 less accumulated depreciation of $1,000) was sold for $500.

4.Depreciation of $1,600 is included in operating expenses.

5.On January 15, 2018, the company exchanged 30,000 shares of common stock for land located at 1000 Main Street in Frisco, Texas.The land is appraised at $1,500,000.

Required: Prepare Smith Industries' complete 2018 statement of cash flows, using the indirect method to present cash flows from operating activities.This should be done by hand and in perfect format.