Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business. (Although the serial…

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we will prepare the statement of cash flows using the following financial data.)

  

BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2016
  Computer services revenue       $ 25,107  
  Net sales         18,493  
       

  Total revenue         43,600  
  Cost of goods sold $ 14,152      
  Depreciation expense—Office equipment   400      
  Depreciation expense—Computer equipment   1,180      
  Wages expense   2,550      
  Insurance expense   465      
  Rent expense   2,175      
  Computer supplies expense   1,275      
  Advertising expense   520      
  Mileage expense   230      
  Repairs expense—Computer   940      
 

     
  Total expenses         23,887  
       

  Net income       $ 19,713  
       




 

BUSINESS SOLUTIONS
Comparative Balance Sheets
December 31, 2015, and March 31, 2016
  Mar. 31, 2016   Dec. 31, 2015
  Assets              
  Cash $ 83,397     $ 58,952  
  Accounts receivable   24,467       5,368  
  Inventory   674       0  
  Computer supplies   2,035       520  
  Prepaid insurance   1,040       1,665  
  Prepaid rent   775       775  
 


 


  Total current assets   112,388       67,280  
  Office equipment   7,200       7,200  
  Accumulated depreciation—Office equipment   (800 )     (400 )
  Computer equipment   19,900       19,900  
  Accumulated depreciation—Computer equipment   (2,360 )     (1,180 )
 


 


  Total assets $ 136,328     $ 92,800  
 





 





  Liabilities and Equity              
  Accounts payable $ 0     $ 1,180  
  Wages payable   955       560  
  Unearned computer service revenue   0       1,800  
 


 


  Total current liabilities   955       3,540  
  Equity              
  Common stock   112,000       81,000  
  Retained earnings   23,373       8,260  
 


 


  Total liabilities and equity $ 136,328     $ 92,800  
 





 






  

Required:

Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2016. Recall that the owner Santana Rey contributed $31,000 to the business in exchange for additional stock in the first quarter of 2016 and has received $4,600 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

 
References
eBook & Resources
WorksheetLearning Objective: 12-P1 Prepare a statement of cash flows.Learning Objective: 12-P3 Determine cash flows from both investing and financing activities.
Difficulty: 3 HardLearning Objective: 12
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