Question

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized.

	Current Year				Prior Year
Balance Sheet
Assets
Cash	$	129,300			$	146,100
Accounts receivable		156,000				136,500
Merchandise inventory		117,000				126,750
Property and equipment		224,000				117,000
Less: Accumulated depreciation		(65,360	)			(34,000	)
Total assets	$	560,940			$	492,350
Liabilities:
Accounts payable	$	19,500			$	23,400
Salaries and Wages Payable		3,900				1,950
Notes payable, long-term		97,500				117,000
Stockholders’ Equity:
Common stock		176,000				156,000
Retained earnings		264,040				194,000
Total liabilities and stockholders’ equity	$	560,940			$	492,350
Income Statement
Sales	$	580,000
Cost of goods sold		300,000
Depreciation expense		31,360
Other expenses		145,000
Net income	$	103,640

Other information from the company’s records includes the following:

• Bought equipment for cash, $107,000.
• Paid $19,500 on long-term note payable.
• Issued new shares of common stock for $20,000 cash.
• Cash dividends of $33,600 were declared and paid to stockholders.
• Accounts Payable arose from inventory purchases on credit.
• Income tax expense ($25,910) and interest expense ($5,850) were paid in full at the end of both years and are included in Other Expenses.

Answer 1

                                                       Statement of cash flows

                                            

Particulars	$	$
Cash flow from Operating Activities
Net income	103,640
Add: Adjustments to reconcile net income to net cash provided by operating activities
Depreciation on property, plant and equipment	31,360
Accounts receivable	- 19,500
Inventory	9,750
Accounts payable	- 3,900
Salaries and wages payable	1,950
Net cash provided by Operating Activities		123,300
Cash flow from Investing Activities
Purchase of property, plant and equipment	- 107,000
Net cash used in Investing Activities		- 107,000
Cash flow from Financing Activities
Issue of common stock	20,000
Repayment of note payable	- 19,500
Dividend paid	- 33,600
Net cash used in Financing Activities		- 33,100
Net increase in Cash and Cash Equivalents(I +II +III)		- 16,800
Add: Cash in the beginning of the period		146,100
Cash at the end of the period		129,300