Serial Problem Success Systems (Indirect) LO P1, P2, P3
Adria Lopez, owner of Success Systems, 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.)
|
SUCCESS SYSTEMS
|
|
Income Statement
|
|
For Three Months Ended March 31, 2014
|
|
Computer services revenue
|
|
$ 25,207
|
|
Net sales
|
|
18,293
|
|
Total revenue
|
|
43,500
|
|
Cost of goods sold
|
$ 14,352
|
|
|
Depreciation expense-Office equipment
|
320
|
|
|
Depreciation expense-Computer equipment
|
1,220
|
|
|
Wages expense
|
3,150
|
|
|
Insurance expense
|
525
|
|
|
Rent expense
|
1,975
|
|
|
Computer supplies expense
|
1,265
|
|
|
Advertising expense
|
560
|
|
|
Mileage expense
|
320
|
|
|
Repairs expense-Computer
|
930
|
|
|
Total expenses
|
|
24,617
|
|
Net income
|
|
$ 18,883
|
|
SUCCESS SYSTEMS
|
|
Comparative Balance Sheets
|
|
December 31, 2013, and March 31, 2014
|
|
2014
|
2013
|
|
Assets
|
|
|
|
Cash
|
$ 84,987
|
$ 60,852
|
|
Accounts receivable
|
24,067
|
5,068
|
|
Merchandise inventory
|
614
|
0
|
|
Computer supplies
|
2,075
|
550
|
|
Prepaid insurance
|
1,030
|
1,605
|
|
Prepaid rent
|
785
|
785
|
|
Office equipment
|
7,500
|
7,500
|
|
Accumulated depreciation-Office equipment
|
(640)
|
(320)
|
|
Computer equipment
|
19,600
|
19,600
|
|
Accumulated depreciation-Computer equipment
|
(2,440)
|
(1,220)
|
|
Total assets
|
$ 137,578
|
$ 94,420
|
|
Liabilities and Equity
|
|
|
|
Accounts payable
|
$ 0
|
$ 1,190
|
|
Wages payable
|
935
|
570
|
|
Unearned computer service revenue
|
0
|
1,700
|
|
Common stock
|
114,000
|
83,000
|
|
Retained earnings
|
22,643
|
7,960
|
|
Total liabilities and equity
|
$ 137,578
|
$ 94,420
|
Required:
Prepare a statement of cash flows for Success Systems using the indirect method for the three months ended March 31, 2014. Recall that the owner Adria Lopez contributed $31,000 to the business in exchange for additional stock in the first quarter of 2014 and has received $4,200 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)