ACCT2-103 - Serial Problem Success Systems (Indirect)

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 $25,160 
Net sales 18,693 

Total revenue 43,853 
Cost of goods sold$14,052 
Depreciation expense—Office equipment 400 
Depreciation expense—Computer equipment 1,250 
Wages expense 3,250 
Insurance expense 555 
Rent expense 2,475 
Computer supplies expense 1,305 
Advertising expense 600 
Mileage expense 320 
Repairs expense—Computer 960 


Total expenses 25,167 

Net Income $18,686 




SUCCESS SYSTEMS
Comparative Balance Sheets
December 31, 2013, and March 31, 2014
2014 2013

Assets 
Cash$77,845 $58,160 
Accounts receivable 22,720 5,668 
Merchandise Inventory 704 0 
Computer supplies 2,005 580 
Prepaid Insurance 1,110 1,665 
Prepaid rent 825 825 
Office equipment 8,000 8,000 
Accumulated depreciation—Office equipment (800) (400)
Computer equipment 20,000 20,000 
Accumulated depreciation—Computer equipment (2,500) (1,250)


Total assets $ 129,909 $ 93,248  


Liabilities and Equity
Accounts payable $ 0 $ 1,100  
Wages payable 875 500  
Unearned computer service revenue 0 1,500  
Common stock 108,000 83,000  
Retained earnings 21,034 7,148  


Total liabilities and equity $ 129,909 $ 93,248  




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 $25,000 to the business in exchange for additional stock in the first quarter of 2014 and has received $4,800 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)