Starfire Telescopes Company Uses the Indirect Method to Prepare the Statement

question 99

Essay

Starfire Telescopes Company uses the indirect method to prepare the statement of cash flows.Refer to the following income statement:
$\begin{array}{c} \text {Starfire Telescopes Company } &\\ \text { Income Statement } &\\ \text { Year Ended December 31, 2017 } &\end{array}$
$\begin{array}{ll}\text { Sales Revenue } & \$ 275,000 \\\text { Interest Revenue } & \underline{2,600} \\\text { Total Revenues } &&\$277,600 \\\text { Cost of Goods Sold } & 135,000 \\\text { Salary Expense } & 66,500\\\text { Depreciation Expense } & 32,000 \\\text { Other Operating Expenses } & 35,900 \\\text { Interest Expense } & 2,400 \\\text { Income Tax Expense } & 6,500 \\\text { Loss on Sale of Plant Assets } & \underline{2,000} \\\text { Total Expenses } &&\underline{280,300} \\\text { Net Loss }&&\underline{(\$2,700)}\end{array}$ Additional information provided by the company includes the following:
Current assets other than cash decreased by $25,000.
Current liabilities increased by $3,000.
Prepare the operating activities section of the statement of cash flows.

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Definitions:

Revenue Recognition

The accounting principle that outlines the specific conditions under which revenue is recognized and dictates how it should be measured and reported in the financial statements.

Disclosures

Information provided in financial statements and notes that gives insight into the basis of preparation and specific accounting policies, significant judgments, and potential risks.

IAS 1

International Accounting Standard 1, which outlines the presentation of financial statements, aiming for comparability, transparency, and fairness in financial reporting.