In: Accounting
Statement of Cash Flows—Indirect Method
The comparative balance sheet of Whitman Co. at December 31, 20Y2 and 20Y1, is as follows:
Dec. 31, 20Y2 | Dec. 31, 20Y1 | ||||
Assets | |||||
Cash | $ 832,360 | $ 896,400 | |||
Accounts receivable (net) | 757,450 | 690,860 | |||
Inventories | 1,148,660 | 1,057,100 | |||
Prepaid expenses | 26,640 | 31,630 | |||
Land | 286,330 | 432,830 | |||
Buildings | 1,323,450 | 815,710 | |||
Accumulated depreciation-buildings | (374,560) | (349,590) | |||
Equipment | 466,120 | 412,020 | |||
Accumulated depreciation-equipment | (128,180) | (144,000) | |||
Total assets | $4,338,270 | $3,842,960 | |||
Liabilities and Stockholders' Equity | |||||
Accounts payable (merchandise creditors) | $ 824,270 | $ 869,820 | |||
Bonds payable | 242,940 | 0 | |||
Common stock, $20 par | 286,000 | 106,000 | |||
Paid-in capital: Excess of issue price over par-common stock | 686,000 | 506,000 | |||
Retained earnings | 2,299,060 | 2,361,140 | |||
Total liabilities and stockholders' equity | $4,338,270 | $3,842,960 |
The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows:
ACCOUNT Land | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 432,830 | |||
Apr. 20 | Realized $136,200 cash from sale | 146,500 | 286,330 |
ACCOUNT Buildings | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 815,710 | |||
Apr. 20 | Acquired for cash | 507,740 | 1,323,450 |
ACCOUNT Accumulated Depreciation-Buildings | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 349,590 | |||
Dec. 31 | Depreciation for year | 24,970 | 374,560 |
ACCOUNT Equipment | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 412,020 | |||
Jan. 26 | Discarded, no salvage | 45,300 | 366,720 | ||
Aug. 11 | Purchased for cash | 99,400 | 466,120 |
ACCOUNT Accumulated Depreciation-Equipment | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 144,000 | |||
Jan. 26 | Equipment discarded | 45,300 | 98,700 | ||
Dec. 31 | Depreciation for year | 29,480 | 128,180 |
ACCOUNT Bonds Payable | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
May 1 | Issued 20-year bonds | 242,940 | 242,940 |
ACCOUNT Common Stock, $20 par | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 106,000 | |||
Dec. 7 | Issued 9,000 shares of common stock for $40 per share |
180,000 | 286,000 |
ACCOUNT Paid-in Capital in Excess of Par-Common Stock | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 506,000 | |||
Dec. 7 | Issued 9,000 shares of common stock for $40 per share |
180,000 | 686,000 |
ACCOUNT Retained Earnings | ACCOUNT NO. | ||||
Balance | |||||
Date | Item | Debit | Credit | Debit | Credit |
20Y2 | |||||
Jan. 1 | Balance | 2,361,140 | |||
Dec. 31 | Net loss | 29,890 | 2,331,250 | ||
Dec. 31 | Cash dividends | 32,190 | 2,299,060 |
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
Whitman Co. | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 20Y2 | ||
Cash flows from operating activities: | ||
Net loss | $ | |
Adjustments to reconcile net loss to net cashflow from operating activities: | ||
Depreciation | ||
Loss on sale of land | ||
Changes in current operating assets and liabilities: | ||
Increase in accounts receivable | ||
Increase in inventories | ||
Decrease in prepaid expenses | ||
Decrease in accounts payable | ||
Net cash flow used for operating activities | $ | |
Cash flows from investing activities: | ||
Cash received from gain on sale of land | $ | |
Loss on sale of land | ||
Cash paid for purchase of equipment | ||
Net cash flow used for investing activities | ||
Cash flows from financing activities: | ||
Cash received from issuance of bonds payable | $ | |
Cash received from issuance of common stock | ||
Cash paid for dividends | ||
Net cash flow from financing activities | ||
Increase in accounts payable | $ | |
Cash at the beginning of the year | ||
Cash at the end of the year | $ |
Solution
Whitman Co. | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 20Y2 | ||
Cash flows from operating activities: | ||
Net loss | $ (29,890.00) | |
Adjustments to reconcile net loss to net cashflow from operating activities: | ||
Depreciation | $ 54,450.00 | |
Loss on sale of land | $ 10,300.00 | |
Changes in current operating assets and liabilities: | ||
Increase in accounts receivable | $ (66,590.00) | |
Increase in inventories | $ (91,560.00) | |
Decrease in prepaid expenses | $ 4,990.00 | |
Decrease in accounts payable | $ (45,550.00) | |
Net cash flow used for operating activities | $ (163,850.00) | |
Cash flows from investing activities: | ||
Cash received from sale of land | $ 136,200.00 | |
Cash paid for purchase of Building | $ (507,740.00) | |
Cash paid for purchase of equipment | $ (99,400.00) | |
Net cash flow used for investing activities | $ (470,940.00) | |
Cash flows from financing activities: | ||
Cash received from issuance of bonds payable | $ 242,940.00 | |
Cash received from issuance of common stock | $ 360,000.00 | |
Cash paid for dividends | $ (32,190.00) | |
Net cash flow from financing activities | $ 570,750.00 | |
Increase in accounts payable | -$ 64,040.00 | |
Cash at the beginning of the year | $ 896,400.00 | |
Cash at the end of the year | $ 832,360.00 |