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:

Factoring Commissions

Factoring commissions are fees paid to a factor, or financial intermediary, for advancing funds to a business by purchasing its accounts receivable.

Accounts Receivable

Amounts owed to a business by its customers for goods or services delivered or used but not yet paid for.

Loss

The result when a company's expenses exceed its revenues during a specific period of time.

Expense

An outflow of money or other resources, incurred to generate revenue, which is recognized in the income statement.