Statement of Cash Flows Troubleshooting Homework Why doesn't this balance? Please fix it. (There could be up to 5 mistakes.) End of Beginning Current Balance sheet year of year Change Income statement year Cash 76,000 Accounts receivable 116,000 Inventory Total current assets Equipment, at cost 1 Less: Accum. depreciation 2Net book value of equipment 200,000 3 Total assets 42,000 107,000 88,000 94,000 280,000 243,000 280,000 210,000 70,000 (80,000) (67,000) (13,000) 143,000 57,000 480,000 386,000 94,000 34,000 Sales 900,000 9,000 Cost of goods sold 700,000 (6,000) Gross profit 200,000 37,000 Operating expenses 135,000 Income from operations 65,000 Other income & (expense): Interest expense (12,500) Interest income 1,500 4 Loss on sale of equipment (4.000) 5 Accounts payable 70,000 6 Interest payable 7 Total current liabilities 81,000 7,000 4,000 77,000 85,000 (11,000) Total other income/(expense) (15,000) 3,000 Income before taxes 50,000 (8,000) Income tax expense 20,000 8 Notes payable 235,000 176,000 59,000 Net income 30,000 9 Total liabilities 312,000 261,000 51,000 0 Common stock 1 Additional paid-in capital 2 Retained earnings 23 Total S.H. equity 24 Total liabilities & equity 40,000 30,000 25,000 20,000 5,000 103,000 75,000 28,000 168,000 125,000 43,000 480,000 386,000 94,000 10,000 25 26 Additional information: Equipment that originally cost 15,000 with accumulated depreciation of 8,000 27 was sold during the year for cash. The company also had 75,000 of new borrowing during the year. 28 Depreciation expense is included as part of the amount for operating expenses in the income statement 29 30 32 Cash Flow from Operating Activities: 33 Net income 34 35 Depreciation expense Loss on sale of equipment Statement of Cash Flows - Indirect Method Incorrect version Correct amounts 30,000 13,000 4,000 (9,000) 6,000 11,000 3,000 41 Net cash flow from operating activies 58,000 42 36 Change in accounts receivable 37 Change in inventory 38 Change in accounts payable 39 Change in interest payable 43 Cash Flow from Investing Activities: Proceeds from the sale of equipment 45 Purchases of equipment 44 3,000 (77,000) year mpany new borrowing during the year. 28 Depreciation expense is included as part of the amount for operating expenses in the income statement. 29 30 Statement of Cash Flows - Indirect Method Incorrect version Correct amounts 30,000 32 Cash Flow from Operating Activities: Depreciation expense 33 Net income 34 35 Loss on sale of equipment 13,000 36 Change in accounts receivable 37 Change in inventory 38 Change in accounts payable 4,000 (9,000) 39 Change in interest payable 6,000 11,000 3,000 41 Net cash flow from operating activies 58,000 42 44 45 43 Cash Flow from Investing Activities: Proceeds from the sale of equipment Purchases of equipment 3,000 (77,000) 47 Net cash flow from investing activities (74,000) 48 50 51 49 Cash Flow from Financing Activities: Proceeds from issuance of long-term debt Principal payments on long-term debt 75,000 (59,000) 52 53 Proceeds from issuance of common stock Dividends paid 15,000 (2,000) 55 Net cash flow from financing activities 29,000 56 57 Net increase/(decrease) in cash 13,000 58 Cash at beginning of year 42,000 59 Cash at end of year $ 55,000 60 61 +