Serial problem business solutions lo p1 p2 p3 p4 p5

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.)