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Statement of Cash Flows—Indirect Method The comparative balance sheet of Whitman Co. at December 31, 20Y2...

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 $

Solutions

Expert Solution

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

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