Question

Statement of Cash Flows (Direct Method)
Wolff Company's income statement and comparative balance sheets follow.

WOLFF COMPANY
Income Statement
For Year Ended December 31, 2019
Sales		$635,000
Cost of goods sold	$430,000
Wages expense	86,000
Insurance expense	8,000
Depreciation expense	17,000
Interest expense	9,000
Income tax expense	29,000	579,000
Net income		$56,000

WOLFF COMPANY
Balance Sheet
	Dec. 31, 2019	Dec. 31, 2018
Assets
Cash	$11,000	$5,000
Accounts receivable	41,000	32,000
Inventory	90,000	60,000
Prepaid insurance	5,000	7,000
PPE	250,000	195,000
Accumulated depreciation	(68,000)	(51,000)
Total assets	$329,000	$248,000
Liabilities and Stockholders' Equity
Accounts payable	$7,000	$10,000
Wages payable	9,000	6,000
Income tax payable	7,000	8,000
Bonds Payable	130,000	75,000
Common stock	90,000	90,000
Retained earnings	86,000	59,000
Total liabilities and equity	$329,000	$248,000

Cash dividends of $29,000 were declared and paid during 2019. Also in 2019, PPE was purchased for cash, and bonds payable were issued for cash. Bond interest is paid semiannually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required
a. Compute the change in cash that occurred during 2019.

Note: Do not use a negative sign with your answer.

$Answer

AnswerIncrease in cashDecrease in cashNeither an increase or decrease in cash

b. Prepare a 2019 statement of cash flows using the direct method.
Note: Use a negative sign to indicate a cash outflow.

Wolff Company
Statement of Cash Flows
For Year Ended December 31, 2019
Operating Activities
Cash Received from Customers	Answer
AnswerCash Paid for Merchandise PurchasedCash Paid for PPEDepreciation ExpenseGain on Sale of PPEIncrease in Retained EarningsIssuance of Bonds PayablePurchase of PPEN/A	Answer
Cash Paid to Employees	Answer
Cash Paid for Insurance	Answer
Cash Paid for Interest	Answer
Cash Paid for Income Taxes	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Investing Activities
AnswerCash Paid for Merchandise PurchasedCash Paid for PPEDepreciation ExpenseGain on Sale of PPEIncrease in Retained EarningsIssuance of Bonds PayablePurchase of PPEN/A	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Financing Activities
AnswerCash Paid for Merchandise PurchasedCash Paid for PPEDepreciation ExpenseGain on Sale of PPEIncrease in Retained EarningsIssuance of Bonds PayablePurchase of PPEN/A	Answer
Payment of Dividends	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Net Increase in Cash		Answer
Cash at Beginning of Year		Answer
Cash at End of Year		Answer

Answer 1

a. Compute the change in cash that occurred during 2019.

Increase in Cash = Closing Cash - Opening cash = 11000 - 5000 = $6000

b.