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:
Current Year Previous Year
Balance Sheet at December 31
Cash $ 35,370 $ 30,450
Accounts Receivable 36,600 28,800
Inventory 42,600 38,800
Equipment 133,000 108,000
Accumulated Depreciation—Equipment (31,600 ) (25,800 )
Total Assets $ 215,970 $ 180,250
Accounts Payable $ 37,600 $ 27,800
Salaries and Wages Payable 970 1,250
Note Payable (long-term) 45,200 52,000
Common Stock 93,400 73,400
Retained Earnings 38,800 25,800
Total Liabilities and Stockholders’ Equity $ 215,970 $ 180,250
Income Statement
Sales Revenue $ 128,000
Cost of Goods Sold 74,000
Other Expenses 41,000
Net Income $ 13,000
Additional Data:
a. Bought equipment for cash, $25,000. Paid $6,800 on the long-term note payable.
b. Issued new shares of stock for $20,000 cash.
c. No dividends were declared or paid.
Other expenses included depreciation, $5,800; salaries and wages, $20,800; taxes, $6,800; utilities, $7,600.
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. Using the indirect method.
2. Evaluate the statement of the cash flows.

1. The preparation of XS Supply Company's Statement of Cash Flows, using the indirect method is as follows:

XS Supply Company's

Statement of Cash Flows

For the Current Year Ended December 31

Operating Activities:

Net Income                                       $13,000

Non-Cash Expense:

Depreciation                                        5,800

Cash from operations                     $18,800

Changes in working capital:

Accounts Receivable                        (7,800)

Inventory                                           (3,800)  

Accounts Payable                             9,800

Salaries & Wages Payable                 (280)

Net Cash Flows from operations $16,720

Financing Activities:

Issuance of new stock                $20,000

Long-term note payable payment (6,800)

Net Cash Flows from financing  $13,200

Investing Activities:

Equipment Purchase                ($25,000)

Net Cash Flows: investing      ($25,000)

Net Cash Flows                          $4,920

Reconciliation of Cash:

Beginning Cash balance $ 30,450

Net Cash Flows                   $4,920

Ending Cash balance      $ 35,370

2. The Statement of Cash Flows shows that the cash inflows increased positively from $30,450 to $35,370.  This increase was boosted by the issuance of new stock for $20,000 and an appreciably increase in cash from operations of $18,800.  The investment in new Equipment reduced these increases by $25,000.

Data and Calculations:

                                                              Current Year  Previous Year  Changes

Balance Sheet at December 31

Cash                                                              $ 35,370      $ 30,450   +$4,920

Accounts Receivable                                     36,600         28,800      +7,800

Inventory                                                         42,600          38,800    +3,800

Equipment                                                     133,000        108,000  +25,000

Accumulated Depreciation—Equipment      (31,600 )      (25,800 )  +5,800

Total Assets                                               $ 215,970    $ 180,250

Accounts Payable                                      $ 37,600      $ 27,800   +$9,800

Salaries and Wages Payable                            970             1,250         -280

Note Payable (long-term)                            45,200          52,000     -6,800

Common Stock                                            93,400          73,400  +20,000

Retained Earnings                                       38,800          25,800  +13,000

Total Liabilities & Stockholders’ Equity $ 215,970     $ 180,250

Income Statement

Sales Revenue              $ 128,000

Cost of Goods Sold           74,000

Other Expenses                 41,000

Net Income                     $ 13,000

Additional Data:

a. Payments:

Equipment Purchase $25,000

Long-term note payable $6,800

b. Issuance of new shares of stock = $20,000

c. No dividends were declared or paid.

d. Other expenses:

Depreciation, $5,800

Salaries and wages, $20,800

Taxes, $6,800

Utilities, $7,600

Thus, overall, XS Supply Company performed creditably with regard to its cash flows in the current year.

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B.) The net cashflow from operating activities stands at $16,720 while that from investing activities was ($25,000) for equipment purchase. The net cash from financing activities is $13,200 giving a total net cash increase of $4920 for the year. With the total cash balance at end totaling $35,370 including the beginning cash balance of $30,450

Explanation:

Kindly check attached picture for detailed statement of cash flow

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