91Ó°ÊÓ

Preparing the statement of cash flows—indirect method The income statement of Boost Plus, Inc. follows: Gross Profit Net Sales Revenue Cost of Goods Sold Salaries Expense 137,000 94,000 3,000 56,000 \( 54,000 81,000 Depreciation Expense––Plant Assets Net Income Before Income Taxes Income Tax Expense Net Income Total Operating Expenses 27,000 \) 53,000 BOOST PLUS, INC. Income Statement Year Ended September 30, 2018 Operating Expenses: \( 231,000 Additional data follow: a. Acquisition of plant assets is \)124,000. Of this amount, \(108,000 is paid in cash and \)16,000 by signing a note payable. b. Cash receipt from sale of land totals \(20,000. There was no gain or loss. c. Cash receipts from issuance of common stock total \)36,000. d. Payment of notes payable is \(15,000. e. Payment of dividends is \)5,000. f. From the balance sheet: September 30 2018 2017 Cash \( 39,000 \) 13,000 Accounts Receivable 46,000 61,000 Merchandise Inventory 94,000 88,000 Land 82,000 102,000 Plant Assets 214,000 90,000 Accumulated Depreciation (61,000) (34,000) Accounts Payable 32,000 15,000 Accrued Liabilities 12,000 20,000 Notes Payable (long-term) 16,000 15,000 Common Stock, no par 40,000 4,000 Retained Earnings 314,000 266,000 Prepare Boost Plus’s statement of cash flows for the year ended September 30, 2018, using the indirect method. Include a separate section for non-cash investing and financing activities

Step by step solution

01

Statement of cash flows using the indirect method

Boost Plus Inc. Statement of Cash Flows For the year ended December 31, 2018
Cash Flows from Operating Activities:
Net Income	$53,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$27,000
Decrease in account receivables ($61,000-$46,000)	$15,000
Increase in merchandise inventory ($94,000-$88,000)	($6,000)
Increase in account payable($32,000-$15,000)	$17,000
Decrease in accrued liabilities ($20,000-$12,000)	($8,000)
Net cash provided/ (used) in operating activities	$98,000
Cash Flows from Investing Activities:
Purchase of plant	($108,000)
Sale of land	$20,000
Net cash provided/ (used) in investing activities	($88,000)

Cash Flows from Financing Activities:
Issuance of common stock	$36,000
Payment of notes payable	($15,000)
Dividend paid	($5,000)
Net cash provided/ (used) in financing activities	$16,000
Net increase/(Decrease) in cash	$26,000
Cash Balance, December 31, 2017	$13,000
Cash Balance, December 31, 2018	$39,000

02

Schedule of non-cash investing and financing activities

Boost Plus Inc. Statement of Cash Flows (Partial) For the year ended December 31, 2018
Non-cash Investing and financing activities
Acquisition of land by issuing long-term notes payable	$18,000
Total Non-cash Investing and financing activities	$18,000

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