Using the financial data below, prepare a statement of cash flows for the year ended December 31, 2014 for Summer Peebles, Inc. using the indirect method. Summer Peebles, Inc.
Income Statement
Year Ending December 31, 2014
Sales $1,000.00
Cost of Goods Sold -$650.00
Depreciation Expense -$100.00
Sales and General Expense-$100.00
Interest Expense -$50.00
Income Tax Expense - $40.00
Net Income $60.00
Summer Peebles, Inc.
Balance Sheets as of December 31, 2013 and 2014
Assets 2013 2014
Cash $50.00 $60.00
Accounts Receivable, Net $500.00 $520.00
Inventory $750.00 $770.00
Current Assets $1,300.00 $1,350.00
Fixed Assets, Net $500.00 $550.00
Total Assets $1,800.00 $1,900.00
Liabilities and Equity
Notes Payable to Banks $100.00 $75.00
Accounts Payable $590.00 $615.00
Interest Payable $10.00 $20.00
Current Liabilities $700.00 $710.00
Long-Term Debt $300.00 $350.00
Deferred Income Tax $300.00 $310.00
Capital Stock $400.00 $400.00

Summer Peebles, Inc.

Statement of cash flows for the year ended December 31, 2014

Cash Flow From Operating Activities

Net Income before tax and interest                              $150.00

Adjustment for non-cash items :

Depreciation Expense                                                    $100.00

Adjustment for changes in working capital items :

Increase in Accounts Receivable                                  ($20.00)

Increase in Inventory                                                     ($20.00)

Decrease in Notes Payable to Banks                           ($25.00)

Increase in Accounts Payable                                         $25.00

Interest Paid ($10.00 + $50.00 - $20.00)                     ($40.00)

Income taxes Paid ($300.00 + $40.00 - $310.00)       ($30.00)

Net Cash flow from Operating Activities                    $140.000

Cash Flow From Investing Activities

Purchase of Fixed Assets                                              ($50.00)

Net Cash flow from Investing Activities                        ($50.00)

Cash Flow From Financing Activities

Long term debt issue                                                       $50.00

Net Cash flow from Financing Activities                         $50.00

Movement During the year                                               $10.00

Cash and Cash Equivalents at Beginning of the year   $50.00

Cash and Cash Equivalents at the End of the Year       $60.00

Explanation:

Under the Indirect method, Cash flow from Operating Activities is determined by adjusting the Net Profit / Income before tax and interest with non-cash items previously deducted or add to it and any changes in working capital items.

the answerr would be 1

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30