help with accounting problem cash flow statement 461261

Natalie has prepared the balance sheet and income statement of Cookie & Coffee

Creations Inc. for the first year of operations, but does not understand how to prepare the cash

flow statement.The income statement and balance sheet appear below. Recall that the company

started operations on November 1, 2012, so all of the opening balances are zero.

Additional information:

1. Recall from Chapter 15 that the company bought kitchen equipment (a commercial oven)

for $17,000 on November 1, 2012, and signed a $12,000 note payable to help pay for it.The

terms provide for semiannual fixed principal payments of $2,000 on May 1 and November 1

of each year, plus interest of 5%. All other furniture, fixture, and equipment were purchased

during the year for cash.

2. Recall from Chapter 14 that the company originally issued 25,930 common shares for

$25,930, of which 750 shares were repurchased from the lawyer for $500.

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Income Statement

Year Ended October 31, 2013

Sales $462,500

Cost of goods sold 231,250

Gross profit 231,250

Operating expenses

Salaries and wages expense $92,500

Depreciation expense 9,850

Other operating expenses 35,987 138,337

Income from operations 92,913

Other expenses

Interest expense 413

Income before income tax 92,500

Income tax expense 18,500

Net income $ 74,000


Balance Sheet

October 31, 2013


Current assets

Cash $32,219

Accounts receivable 3,250

Inventory 17,897

Prepaid expenses 6,300 $ 59,666

Property, plant, and equipment

Furniture and fixtures $12,500

Accumulated depreciation”furniture and fixtures (1,250) 11,250

Computer equipment 4,200

Accumulated depreciation”computer equipment (600) 3,600

Kitchen equipment 83,000

Accumulated depreciation”kitchen equipment (8,300) 75,000 89,850

Total assets $149,516

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable $ 5,848

Income tax payable 18,500

Dividends payable 700

Salaries payable 2,250

Interest payable 188

Note payable”current portion 4,000 $ 31,486

Long-term liabilities

Note payable”long-term portion 6,000

Total liabilities 37,486

Stockholders’ equity

Paid-in capital

Preferred stock, 2,800 shares issued and

outstanding $ 14,000

Common stock, 25,930 shares issued, 25,180

outstanding 25,930 39,930

Retained earnings 72,600

Total paid-in capital and retained earnings 112,530

Less: Treasury stock”common (750 shares), at cost (500)

Total stockholders’ equity 112,030

Total liabilities and stockholders’ equity $149,516


(a) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended

October 31, 2013, using the indirect method.

(b) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended

October 31, 2013, using the direct method.


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