Question

Refer to the information reported about Satu Company in Problem 12-6B.

Required

Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 12A.1; report operating activities under the indirect method. Identify the debits and credits in the Analysis of Changes columns with letters that correspond to the following list of transactions and events.

a. Net income was \(202,767.

b. Accounts receivable decreased.

c. Inventory increased.

d. Accounts payable decreased.

e. Income taxes payable decreased.

f. Depreciation expense was \)15,700.

g. Purchased equipment for \(30,250 cash.

h. Issued 3,000 shares at \)21 cash per share.

i. Declared and paid $60,000 of cash dividends.

Short answer

The debit and credit analysis column total$543,860.

Step-by-step solution

Definition of Depreciation Expenses

The non-cash expense incurred by the business entity for recovering the cost of capital expenditure for acquiring an asset is known as depreciation expenses. These expenses reduce the value of the fixed assets.

Analysis of changes

Particular

Analysis of changes

2016

Debit

Credit

2017

Debits of the balance sheet:
Cash	$28,400			$58,750
Accounts receivable	25,860		5,638	20,222
Inventory	140,320	25,347		165,667
Equipment	77,500	30,250		107,750
	$272,080			$352,389
Credits of balance sheet:
Accumulated depreciation – equipment	31,000		15,700	46,700
Account payable	157,530	137,158		20,372
Income tax payable	6,100	4,000		2,100
Common stock, $5 par value	25,000		15,000	40,000
Paid-in-capital in excess of par – common stock	20,000		48,000	68,000
Retained earnings	32,450	$60,000	$202,767	175,217
Total	$272,080			$352,389

Cash flow statement

Operating activities
Net income	$202,767
Depreciation expenses	15,700
Decrease in accounts receivable	5,638
Increase in inventory		$25,347
Decrease in accounts payable		137,158
Decrease in income tax payable		4,000
Investing activities
Purchase of equipment		30,250
Financing activities
Issue of shares	63,000
Payment of cash dividend		60,000
Total	$543,860	$543,860