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 42,000 34,000 Sales 900,000 Accounts receivable 116,000 107,000 9,000 Cost of goods sold 700,000 Inventory 88,000 94,000 (6,000) Gross profit 200,000 Total current assets Equipment, at cost 135,000 Operating expenses 280,000 243,000 280,000 210,000 37,000 70,000 Income from operations 65,000 (80,000) (67.000) (13,000) Other income & (expense): 1 Less: Accum. depreciation 2 Net book value of equipment Total assets 200,000 143,000 57,000 Interest expense (12,500) 3 480,000 386,000 94,000 Interest income 1,500 4 Loss on sale of equipment (4.000) 5 Accounts payable (11,000) Total other income/(expense) (15,000) 6 Interest payable 70,000 81,000 7,000 4,000 77,000 85,000 3,000 Income before taxes 50,000 7 Total current liabilities (8,000) Income tax expense 20,000 30,000 8 Notes payable 235,000 176,000 59,000 Net income 9 Total liabilities 51,000 312,000 261,000 40,000 20 Common stock 30,000 10,000 1 Additional paid-in capital 5,000 25,000 20,000 103,000 75,000 22 Retained earnings 28,000 23 Total S.H. equity 168,000 125,000 43,000 480,000 24 Total liabilities & equity 386,000 94,000 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 AEREREN 30 Statement of Cash Flows - Indirect Method 32 Cash Flow from Operating Activities: Incorrect version Correct amounts 33 Net income 30,000 34 Depreciation expense 13,000 35 Loss on sale of equipment 4,000 36 (9,000) Change in accounts receivable Change in inventory 37 6,000 38 Change in accounts payable 11,000 39 Change in interest payable 3,000 41 Net cash flow from operating activies 58,000 42 43 Cash Flow from Investing Activities: 44 Proceeds from the sale of equipment 45 Purchases of equipment 3,000 (77,000) year pany had 75,000 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 32 Cash Flow from Operating Activities: 33 Net income 30,000 34 Depreciation expense 13,000 35 Loss on sale of equipment 4,000 36 Change in accounts receivable (9,000) 37 Change in inventory 6,000 11,000 38 Change in accounts payable Change in interest payable 39 3,000 41 Net cash flow from operating activies 58,000 42 43 Cash Flow from Investing Activities: 44 Proceeds from the sale of equipment Purchases of equipment 3,000 45 (77,000) 47 Net cash flow from investing activities (74,000) 48 49 Cash Flow from Financing Activities: 75,000 51 (59,000) 50 Proceeds from issuance of long-term debt Principal payments on long-term debt Proceeds from issuance of common stock Dividends paid 52 15,000 53 (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