Question 1

XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

Current Year Prior Year

Balance Sheet at December 31

Cash $ 46,720 $ 37,200

Accounts Receivable 38,000 30,100

Merchandise Inventory 46,350 38,800

Property and Equipment 132,500 102,000

Less: Accumulated Depreciation (31,700 ) (25,500 )

$ 231,870 $ 182,600

Accounts Payable $ 45,450 $ 34,600

Wages Payable 3,260 3,600

Note Payable, LongTerm 38,700 47,800

Contributed Capital 96,250 73,100

Retained Earnings 48,210 23,500

$ 231,870 $ 182,600

Income Statement(Current year)

Sales $ 168,000

Cost of Goods Sold 97,440

Other Expenses 45,850

Net Income $ 24,710

Additional Data:

Bought equipment for cash, $30,500.

Paid $9,100 on the long-term note payable.

Issued new shares for $23,150 cash.

No dividends were declared or paid.

Other expenses included depreciation, $6,200; wages, $23,500; taxes, $7,250; other, $8,900.

Accounts Payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the year ended December 31 using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) XS SUPPLY COMPANY

Statement of Cash Flows

For the Year Ended December 31

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

0

0

Cash flows from investing activities:

0

Cash flows from financing activities:

0

Net increase in cash during the year

Cash balance, January 1

Cash balance, December 31 $0

Question 2

The following information was reported by three companies. When completing the requirements, assume that any and all purchases on account are for inventory.

Azure

Corporation Best

Bikes Charlottes

Cycles

Cost of goods sold $ 205 $ 207 $ 390

Inventory purchases from suppliers made using cash 290 0 220

Inventory purchases from suppliers made on account 0 260 215

Cash payments to suppliers on account 0 188 180

Beginning inventory 125 112 215

Ending inventory 165 135 270

Beginning accounts payable 0 50 97

Ending accounts payable 0 122 132

Required:

1. What amount did each company deduct on the income statement related to inventory? 2. What total amount did each company pay out in cash during the period related to inventory purchased with cash and on account? 3. By what amount do your answers in requirements 1 and 2 differ for each company? (Input all amounts as positive values.)

Azure Corporation The cash paid is than the income statement deduction by

Best Bikes The cash paid is than the income statement deduction by

Charlottes Cycles The cash paid is than the income statement deduction by 4. By what amount did each companys inventory increase (decrease)? By what amount did each companys accounts payable increase (decrease)?