Use the Following Selected Data About Tiles Ltd

question 19

Essay

Use the following selected data about Tiles Ltd. and prepare the operating activities section of a statement of cash flows for the company for 2005 using the indirect method. $$\begin{array} { l r r } \underline {\text { Balance sheet data} } & \underline { 2005 } & \underline { 2004 } \\\text { Accounts receivable } & \$ 36,000 & \$ 42,000 \\\text { Inventories } & 28,000 & 25,000 \\\text { Accounts payable } & 31,000 & 35,000 \\\text { Salaries payable } & 2,000 & 1,000 \\\text { Equipment } & 60,000 & 40,000 \\\text { Accumulated depreciation } & 12,000 & 16,000 \\\text { Bonds payable } & 50,000 & 100,000 \\\text { Common stock } & 150,000 & 100,000 \\\text { Retained earnings } & 38,000 & 20,000\end{array}$$ $$\begin{array} { l r } \underline {\text { Income statement data} } & \underline { 2005 } \\\text { Net sales } & \$ 420,000 \\\text { Cost of goods sold } & 300,000 \\\text { Operating expenses (excluding depreciation expense) } & 84,000 \\\text { Net income } & 30,000 \\\text { Gain on sale of equipment (included in net income above) } & 2,000\end{array}$$

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Definitions:

Welfare Policy

A governmental strategy designed to support the wellbeing of citizens, often through financial aid, healthcare, and education.

Health Insurance

A type of insurance that covers the whole or part of the risk of a person incurring medical expenses, spreading the risk over numerous individuals.

Adverse Selection

A situation in which sellers have information that buyers do not have, or vice versa, leading to an inefficient market outcome.

Moral Hazard

A situation in which there is a tendency to take riskier behavior when protected from the consequences of that behavior, often seen in insurance and finance.