Question

Complete the following spreadsheet in preparation of the statement of cash flows. (The statement of cash flows is not required.) Prepare the 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 transactions and events a through h.

2. Net income for the year was \(100,000.
3. Dividends of \)80,000 cash were declared and paid.
4. Scoreteck’s only noncash expense was \(70,000 of depreciation.
5. The company purchased plant assets for \)70,000 cash.
6. Notes payable of \(20,000 were issued for \)20,000 cash.
7. Change in accounts receivable.
8. Change in inventory.
9. Change in accounts payable.

A	B	C	D	E	F	G
SCORETECK CORPORATION Spreadsheet for Statement of Cash Flows—Indirect Method For Year Ended December 31, 2017
Analysis of Changes
	Dec. 31, 2016		Debit		Credit	Dec. 31, 2017
Balance Sheet—Debit Bal. Accounts
Cash	\( 80,000					\) 60,000
Accounts receivable	120,000					190,000
Inventory	250,000					230,000
Plant assets	600,000					670,000
	\(1,050,000					\)1,150,000
Balance Sheet—Credit Bal. Accounts
Accumulated depreciation	\( 100,000					\) 170,000
Accounts payable	150,000					140,000
Notes payable	370,000					390,000
Common stock	200,000					200,000
Retained earnings	230,000					250,000
	\(1,050,000					\)1,150,000
Statement of Cash Flows
Operating activities
Net income
Increase in accounts receivable
Decrease in inventory
Decrease in accounts payable
Depreciation expense
Investing activities
Cash paid to purchase plant assets.
Financing activities
Cash paid for dividends.
Cash from issuance of notes

Short answer

S.no.	Particulars	Analysis of change : Balance sheet section	Analysis of change : Statement of cash flow section
a	Net Income	Credit	Debit
b	Dividends of cash were declared and paid	Debit	Credit
c	Depreciation expense	Credit	Debit
d	Plant assets	Debit	Credit
e	Notes payable	Credit	Debit
f	Change in accounts receivable	Debit	Credit
g	Change in inventory	Credit	Debit
h	Change in accounts payable	Debit	Credit

Step-by-step solution

Meaning of Cash flow statement

The cash flow statement gives information on changes in a company's Cash Equivalents and Cash throughout an accounting period. This adjustment consolidates the interests in operating, financing, and investing.

Analysing the cash flow statement

A	B	C	D	E	F	G
SCORETECK CORPORATION Spreadsheet for Statement of Cash Flows—Indirect Method For Year Ended December 31, 2017
Analysis of Changes
	Dec. 31, 2016		Debit		Credit	Dec. 31, 2017
Balance Sheet—Debit Bal. Accounts
Cash	$ 80,000					$ 60,000
Accounts receivable	120,000	(f)	70,000			190,000
Inventory	250,000			(g)	$20,000	230,000
Plant assets	600,000	(d)	70,000			670,000
	$1,050,000					$1,150,000
Balance Sheet—Credit Bal. Accounts
Accumulated depreciation	$ 100,000			(c)	70,000	$ 170,000
Accounts payable	150,000	(h)	10,000			140,000
Notes payable	370,000			(e)	20,000	390,000
Common stock	200,000					200,000
Retained earnings	230,000	(b)	80,000	(a)	100,000	250,000
	$1,050,000					$1,150,000
Statement of Cash Flows
Operating activities
Net income		(a)	100,000
Increase in accounts receivable				(f)	70,000
Decrease in inventory		(g)	20,000
Decrease in accounts payable				(h)	10,000
Depreciation expense		(c)	70,000
Investing activities
Cash paid to purchase plant assets.				(d)	70,000
Financing activities
Cash paid for dividends.				(b)	80,000
Cash from issuance of notes		(e)	20,000
			$440,000		$440,000