The Income statement and selected balance sheet Information for Direct Products Company for the year ended December 31 are presented below. Sales Revenue Expenses: Cost of Goods Sold Income Statement Depreciation Expense Salaries and wages Expense Rent Expense Insurance Expense Interest Expense Utilities Expense Net Income $ 54,600 24,000 2,600 9,600 5,100 2,200 2,100 1,700 $ 7,300 Selected Balance Sheet Accounts Accounts Receivable Inventory Accounts Payable Prepaid Rent Prepaid Insurance Salaries and wages Payable Utilities Payable Required: Ending Balances Beginning Balances $ 565 $ 590 930 740 425 470 27 21 26 30 88 54 22 16 Prepare the cash flows from operating activities section of the statement of cash flows using the Indirect method. (Amounts to be deducted should be indicated with a minus sign.) Answer is complete but not entirely correct. DIRECT PRODUCTS COMPANY Statement of Cash Flows (Partial) For the Year Ended December 31 Cash Flows from Operating Activities: Net Income $ 7,300 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense Changes in Current Assets and Current Liabilities Decrease in Accounts Receivable Decrease in Inventory Decrease in Prepaid Rent Decrease in Prepaid Insurance 2,600 25 (190) (6) 4 Decrease in Accounts Payable Increase in Salaries and Wages Payable Increase in Utilities Payable Net Cash Provided by Operating Activities (45) 35 x 6 9,729 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: Balance Sheet at December 31 Cash Accounts Receivable Inventory Equipment Accumulated Depreciation-Equipment Total Assets Accounts Payable Salaries and wages Payable Notes Payable (long-term) Common Stock Retained Earnings Total Liabilities and Stockholders' Equity Income Statement Service Revenue Cost of Goods Sold Other Expenses Net Income Additional Data: a. Bought equipment for cash, $16,000. b. Paid $5,000 on the long-term notes payable. c. Issued new shares of stock for $11,000 cash. d. No dividends were declared or paid. Current Year Previous Year $ 31,850 33,000 39,000 106,000 (28,000) $ 181,850 $ 34,000 $ 26,750 27,000 37,000 90,000 (24,000) $ 156,750 $ 26,000 1,050 1,150 29,000 34,000 82,600 71,600 35,200 24,000 $ 181,850 $ 156,750 $ 110,000 65,000 33,800 $ 11,200 e. Other expenses Included depreciation, $4,000; salaries and wages, $19,000; taxes, $5,000; utilities, $5,800. f. 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 current year ended December 31 using the Indirect method. (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. XS SUPPLY COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Net Income S 11,200 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense S 4,000 Changes in Current Assets and Current Liabilities Increase in Accounts Receivable (6,000) Increase in Inventory (2,000) Increase in Accounts Payable 8,000 Decrease in Salaries and Wages payable (100) 3,900 15,100 Cash Flows from Investing Activities: Cash Payments to Purchase Equipment (16,000) Net Cash Used in Investing Activities (16,000) Cash Flows from Financing Activities: Cash payments on Notes Payable (long-term) Cash Receipts from Issuing Stock (5,000) 11,000 Net Cash Provided by Financing Activities 6,000