Question

Statement of Cash Flows (Indirect Method) Wolff Company's income statement and comparative balance sheets follow. WOLFF COMPANY Income Statement For Year Ended December 31, 2019 Sales $571,500 Cost of goods sold $387,000 Wages expense 77,400 Insurance expense 7,200 Depreciation expense 15,300 Interest expense 8,100 Income tax expense 26,100 521,100 Net income $50,400 WOLFF COMPANY Balance Sheet Dec. 31, 2019 Dec. 31, 2018 Assets Cash $9,900 $4,500 Accounts receivable 36,900 28,800 Inventory 81,000 54,000 Prepaid insurance 4,500 6,300 PPE 225,000 175,500 Accumulated depreciation (61,200) (45,900) Total assets $296,100 $223,200 Liabilities and Stockholders' Equity Accounts payable $6,300 $9,000 Wages payable 8,100 5,400 Income tax payable 6,300 7,200 Bonds payable 117,000 67,500 Common stock 81,000 81,000 Retained earnings 77,400 53,100 Total liabilities and equity $296,100 $223,200 Cash dividends of $26,100 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. a. Compute the change in cash that occurred during 2019. Note: Do not use negative signs with your answers. Cash, December 31, 2019 Answer Less: Cash, December 31, 2018 Answer Cash increase during 2019 Answer b. Prepare a 2019 statement of cash flows using the indirect method. Note: Use negative signs with your answers to indicate a decrease in cash (use of cash). WOLFF COMPANY Statement of Cash Flows For Year Ended December 31, 2019 Net Cash Flow from Operating Activities Answer Answer Add (Deduct) Items to Convert Net Income to Cash Basis Answer Answer Accounts Receivable Answer Inventory Answer Prepaid Insurance Answer Accounts Payable Answer Wages Payable Answer Income Tax Payable Answer Net Cash Provided by Operating Activities Answer Cash Flows from Investing Activities Answer Answer Cash Flows from Financing Activities Answer Answer Payment of Dividends Answer Net Cash Provided by Financing Activities Answer Net change in cash Answer Cash at Beginning of Year Answer Cash at End of Year Answer?

Answer 1

WOLFF COMPANY
Statement of Cash Flows
For Year Ended December 31, 2019
Cash flow from Operating activities
Net income		50400
Add (deduct) items to convert net income to cash basis
Depreciation	15300
Accounts receivable Increase (28800-36900)	-8100
Inventory Increase (54000-81000)	-27000
Prepaid insurance Decrease (6200-4500)	1800
Accounts payable Decrease (6300-9000)	-2700
Wages payable Increase (8100-5400)	2700
Income tax payable Decrease (63000-7200)	-900	-18900
Cash flow provided by Operating activities		31500
Cash flow from investing activities
Purchase of plant assets (225000-175500)	-49500
Cash flow from financing activities		-49500
Issuance of bonds payable (11700-67500)	49500
Payment of dividends	-26100
Cash provided by financing activities		23400
Net change in cash ($31500-49500+23400)		5400
Cash at beginning of Year		4500
Cash at end of Year		9900