Satellite 2010 was founded in 2010 to apply a new technology for efficiently transmitting closed-circuit (cable) television signals without the need for an in-ground cable. The company earned a profit of $115,000 in 2010, its first year of operations, even though it was serving only a small test market. In 2011, the company began dramatically expanding its customer base. Management expects both sales and net income to more than triple in each of the next five years.

Comparative balance sheets at the end of 2010 and 2011, the company's first two years of operations, follow. (Notice that the balances at the end of the current year appear in the right-hand column.)

Additional Information

The following information regarding the company's operations in 2011 is available in either the company's income statement or its accounting records:

1.

Net income for the year was $440,000. The company has never paid a dividend.

2.

Depreciation for the year amounted to $147,000.

3.

During the year the company purchased plant assets costing $2,200,000, for which it paid $1,850,000 in cash and financed $350,000 by issuing a long-term note payable. (Much of the cash used in these purchases was provided by short-term borrowing, as described below.)

4.

In 2011, Satellite 2010 borrowed $1,450,000 against a $6 million line of credit with a local bank. In its balance sheet, the resulting obligations are reported as notes payable (short-term).

5.

Additional shares of capital stock (no par value) were issued to investors for $500,000 cash.

SATELLITE 2010
COMPARATIVE BALANCE SHEETS

December 31,

2010

2011

  Assets

  Cash and cash equivalents

$

80,000  

$

37,000  

  Accounts receivable

100,000  

850,000  

  Plant and equipment (net of accumulated depreciation)

600,000  

2,653,000  

      Totals

$

780,000  

$

3,540,000  

  Liabilities & Stockholders' Equity

  Notes payable (short-term)

$

- 0 -  

$

1,450,000  

  Accounts payable

30,000  

63,000  

  Accrued expenses payable

45,000  

32,000  

  Notes payable (long-term)

390,000  

740,000  

  Capital stock (no par value)

200,000  

700,000  

  Retained earnings

115,000  

555,000  

      Totals

$

780,000  

$

3,540,000  

Instructions

a.

Prepare a worksheet for a statement of cash flows. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

SATELLITE 2010
Worksheet for a Statement of Cash Flows
For the Year Ended December 31, 2011

  Balance sheet effects:

Effects of Transactions

Beginning
Balance

Debit
Changes

Credit
Changes

Ending
Balance

  Assets

  Cash and cash equivalents

  Accounts receivable

  Plant and equipment (net of accumulated depreciation)

      Totals

  Liabilities & Owners' Equity

  Notes payable (short-term)

  Accounts payable

  Accrued expenses payable

  Notes payable (long-term)

  Capital stock (no par)

  Retained earnings

       Totals

b.

Prepare a statement of cash flows for 2011 by the indirect method.  (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

SATELLITE 2010
Statement of Cash Flows
For the Year Ended December 31, 2011

  Cash flows from operating activities:

$  

       Subtotal

$  

$  

         Net cash operating activities

$  

  Cash flows from investing activities:

$  

          Net cash investing activities

  Cash flows from financing activities:

$  

         Net cash financing activities

$  

  Cash and cash equivalents, January 1, 2011

  Cash and cash equivalents, Dec. 31, 2011

$