Statement of Cash Flows Using A method of preparing the statement of cash flows that reconciles net income with net cash flows from operating activities.Indirect Method

For the year ending March 31, 20Y5, Omega Systems Inc. reported net income of $105,450 and paid dividends of $7,500. Comparative balance sheets as of March 31, 20Y5 and 20Y4, are as follows:

OMEGA SYSTEMS INC.
Balance Sheets
		March 31,				Changes Increase (Decrease)
		20Y5		20Y4
Assets
Current assets:
Cash		$ 39,500		$ 29,250		$ 10,250
Accounts receivable		114,120		78,000		36,120
Inventory		126,550		117,550		9,000
Estimated Returns Inventory		6,600		5,000		1,600
Office supplies		4,255		4,435		(180)
Prepaid insurance		3,975		4,500		(525)
Total current assets		$ 295,000		$238,735		$ 56,265
Property, plant, and equipment:
Land		$ 30,000		$ 30,000		$ 0
Store equipment		350,000		285,000		65,000
Accumulated depreciationstore equipment		(118,550)		(93,900)		(24,650)
Office equipment		23,355		15,000		8,355
Accumulated depreciationoffice equipment		(7,080)		(3,345)		(3,735)
Total property, plant, and equipment		$ 277,725		$232,755		$ 44,970
Total assets		$ 572,725		$471,490		$101,235
Liabilities
Current liabilities:
Accounts payable		$ 24,630		$ 13,905		$ 10,725
Customer refunds payable		9,000		7,500		1,500
Notes payable (current portion)		7,500		7,500		0
Salaries payable		1,710		2,250		(540)
Unearned rent		2,700		3,600		(900)
Total current liabilities		$ 45,540		$ 34,755		$ 10,785
Long-term liabilities:
Notes payable (final payment due in eight years)		30,000		37,500		(7,500)
Total liabilities		$ 75,540		$ 72,255		$ 3,285
Stockholders Equity
Common stock		$ 37,500		$ 37,500		$ 0
Retained earnings		459,685		361,735		97,950
Total stockholders equity		$ 497,185		$399,235		$ 97,950
Total liabilities and stockholders equity		$ 572,725		$471,490		$101,235

Instructions:

1. Prepare a statement of cash flows, using the indirect method. Enter account decreases, cash outflows, and the income statement effects that reduce net income as negative amounts.

Omega Systems Inc.

Statement of Cash Flows

For the Year Ended March 31, 20Y5

Cash flows from operating activities:

Net income

Depreciation expense-store equipment

Depreciation expense-office equipment

Changes in noncash current operating assets and liabilities:

Increase in accounts receivable

Increase in inventory

Increase in estimated returns inventory

Decrease in office supplies

Decrease in prepaid insurance

Increase in accounts payable

Increase in customer refunds payable

Decrease in salaries payable

Decrease in unearned rent

Net cash flows used for investing activities

Cash flows used for financing activities:

Payment of note payable

Payment of dividends

Net cash flows used for financing activities

Net increase in cash

April 1, 20Y4 cash balance

March 31, 20Y5 cash balance