Presented below is a condensed version of the comparative balance sheets for Windsor Corporation for the...

Presented below is a condensed version of the comparative balance sheets for Windsor Corporation for the last two years at December 31.

	2017		2016
Cash	$ 309,750		$ 136,500
Accounts receivable	315,000		323,750
Investments	91,000		129,500
Equipment	521,500		420,000
Accumulated Depreciation-Equipment	(185,500	)	(155,750	)
Current liabilities	234,500		264,250
Common stock	280,000		280,000
Retained earnings	537,250		309,750

Additional information:

Investments were sold at a loss of $17,500; no equipment was sold; cash dividends paid were $52,500; and net income was $280,000.

Prepare a statement of cash flows for 2017 for Windsor Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Expert Solution

Solution

Windsor Corporation
Statement of Cash Flows-Indirect method
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net income		$ 280,000.00
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense	$ 29,750.00
Loss on sale of investment	$ 17,500.00
Decrease in accounts receivable	$ 8,750.00
Decrease in current liabilities	$ (29,750.00)
		$ 26,250.00
Net cash from Operating Activities		$ 306,250.00

Cash flows from investing activities:
Sale of investment	$ 21,000.00
Purchase of Equipment	$(101,500.00)
Net cash from Investing Activities		$ (80,500.00)

Cash flows from financing activities:
Dividends paid	$ (52,500.00)
Net cash from Financing Activities		$ (52,500.00)

Net change in cash during the year		$ 173,250.00
Add: Beginning cash balance		$ 136,500.00
Ending cash balance		$ 309,750.00

General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.

ekkarill92 answered 1 year ago

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