CF 0

CF 1

Stmt Format

Income Taxes

Indirect Method

Solution 0

Does NI=CF?



Cash Flow One

The transactions in this story quite similar to those in Cash Flow Zero; however, you will see that there are differences in the cash flow results.

1. Wilson Company issues 100,000 shares of $1 par common stock and receives $100,000 cash.

2. Wilson Company purchases computer equipment for $36,000. A down payment of $10,000 is made and the rest ($26,000) is financed with a long term note payable.

3. Wilson Company provides $300,000 of services to its clients and receives $140,000 cash; the rest ($160,000) is on account.

4. Wilson Company incurs $200,000 of operating expenses and pays $150,000 in cash; the rest is on account.

5. Adjustment: Wilson Company records depreciation on the computer for the year, $12,000.

6. After computing the net income before taxes, calculate the income tax expense, which is paid in cash. See Corporation Tax Schedule.

As in the previous example, create an income statement, retained earnings statement, balance sheet, and cash flow statement. For the cash flow statement, examine each debit and credit to cash and categorize it as to whether it is an operating, investing or financing transaction.







Acc Payable


Common Stock


Ret Earnings



Notes Pay


Oper Exp


Service Rev


Accts Rec



Depr Exp





Acc Depr


Inc Tax Exp