Exercise 4-16 (Algo) Statement of cash flows; directly from transactions [LO4-8] The following transactions occurred during...

Exercise 4-16 (Algo) Statement of cash flows; directly from transactions [LO4-8]

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1.	Issued 38,000 shares of common stock in exchange for $380,000 in cash.
2.	Purchased equipment at a cost of $56,000. $18,000 cash was paid and a note payable to the seller was signed for the balance owed.
3.	Purchased inventory on account at a cost of $106,000. The company uses the perpetual inventory system.
4.	Credit sales for the month totaled $128,000. The cost of the goods sold was $78,000.
5.	Paid $5,800 in rent on the warehouse building for the month of March.
6.	Paid $6,800 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
7.	Paid $78,000 on account for the merchandise purchased in 3.
8.	Collected $63,000 from customers on account.
9.	Recorded depreciation expense of $1,800 for the month on the equipment.

Required:

Analyze each transaction by indicating the cash effect and classify each as a financing, investing, and/or operating activity (a transaction can represent more than one type of activity).
Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $48,000

Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $48,000. (Amounts to be deducted should be indicated with a minus sign.)

WAINWRIGHT CORPORATION
Statement of Cash Flows
For the Month Ended March 31, 2021
Cash flows from operating activities:





Net cash flows from operating activities		$0
Cash flows from investing activities:


Net cash flows from investing activities		0
Cash flows from financing activities:


Net cash flows from financing activities		0
Net increase in cash		0
Cash and cash equivalents, March 1
Cash and cash equivalents, March 31		$0

Noncash investing and financing activities:
Cost of equipment
Cash paid
Note issued		$0

Solutions

Expert Solution

WAINWRIGHT CORPORATION
Statement of Cash Flows
For the Month Ended March 31, 2021
Cash flows from operating activities:
Collections from customers	63,000
Payment to suppliers of merchandise for sale	(78,000)
Payment of rent	(5,800)
Payment of one-year insurance premium	(6,800)

Net cash flows from operating activities		(27,600)
Cash flows from investing activities:
Purchase of equipment	(18,000)

Net cash flows from investing activities		(18,000)
Cash flows from financing activities:
Issuance of common stock	380,000

Net cash flows from financing activities		380,000
Net increase in cash		334,400
Cash and cash equivalents, March 1		48,000
Cash and cash equivalents, March 31		382,400
Noncash investing and financing activities
Cost of equipment	56,000
Cash paid		18,000
Note issued		38,000

ekkarill92 answered 1 year ago

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