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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