Suppose the income statement for Goggle Company reports $95 of net income, after deducting depreciation of $35. The company bought equipment costing $60 and obtained a long-term bank loan for $70. The company's comparative balance sheet, at December 31, is presented on the following page.

Required:
1. Calculate the change in each balance sheet account, and indicate whether each account relates to operating, investing, and/or financing activities.
2. Prepare a statement of cash flows using the indirect method.
3. In one sentence, explain why an increase in accounts receivable is subtracted.
4. In one sentence, explain why a decrease in inventory is added.
5. In one sentence, explain why an increase in wages payable is added.
6. Are the cash flows typical of a start-up, healthy, or troubled company? Explain.

Transcribed Image Text:

2012 2013 Change Cash Accounts Receivable Inventory Equipment Accumulated Depreciation $ 35 75 260 500 (45) $825 $ 10 445 240 175 135 560 (80) $1,030 $ 50 515 10 455 $1,030 Total Wages Payable Long-term Debt Contributed Capital Retained Earnings 360 $825 Total