Question

Presented below is the comparative balance sheet for Wildhorse Inc., a private company reporting under ASPE, at December 31, 2021, and 2020:

WILDHORSE INC. Balance Sheet December 31
Assets		2021			2020
Cash		$54,900			$98,000
Accounts receivable		101,000			75,000
Inventory		205,000			155,500
Long-term investment		101,500			0
Property, plant, and equipment		535,000			460,000
Less: Accumulated depreciation		(162,500	)		(140,000	)
		$834,900			$648,500
Liabilities and Shareholders' Equity
Accounts payable		$57,500			$47,000
Dividends payable		6,000			0
Income tax payable		14,000			15,000
Long-term notes payable		25,000			0
Common shares		630,000			525,000
Retained earnings		102,400			61,500
		$834,900			$648,500

WILDHORSE INC. Income Statement Year Ended December 31, 2021
Sales					$650,900
Cost of goods sold					432,000
Gross profit					218,900
Operating expenses		$147,500
Loss on sale of equipment		3,000			150,500
Profit from operations					68,400
Interest expense		3,000
Interest revenue		(4,500	)		(1,500	)
Profit before income tax					69,900
Income tax expense					14,000
Profit					$55,900

Additional information:
1.		Cash dividends of $15,000 were declared.
2.		A long-term investment was acquired for cash at a cost of $101,500.
3.		Depreciation expense is included in the operating expenses.
4.		The company issued 10,500 common shares for cash on March 2, 2021. The fair value of the shares was $10 per share. The proceeds were used to purchase additional equipment.
5.		Equipment that originally cost $30,000 was sold during the year for cash. The equipment had a carrying value of $9,000 at the time of sale.
6.		The company issued a note payable for $28,000 and repaid $3,000 by year end.
7.		All purchases of inventory are on credit.
8.		Accounts Payable is used only to record purchases of inventory.

Prepare a cash flow statement for the year using the direct method.

Answer 1

	WILDHORSE INC.
	Cash Flow Statement using Direct Method
S.No.	Particulars		Amount $	Amount $
A	Cash Flow from Operating Activities
	Cash Sales		624900
	Less: Cash purchases		4,71,000
	Less: Operating expenses (excluding current year depreciation)	1,25,000
	Cash Profit		28,900
	Less: Tax		14,000
	Cash Profit after Tax			14,900
B	Cash Flow from Investing Activities
	Purchase of Long Term Investments		-1,01,500
	Sale of Equipment		6,000
	Purchase of Equipment		-2,06,000
				-1,80,500
C	Cash Flow from Financing Activities
	Dividend paid		-9,000
	Issue of Long-term notes payable		25,000
	Issue of Common Shares		1,05,000
	Interest Expenses		-3,000
	Interest Income		4,500
				1,22,500
	Net increase in cash & cash equivalent			-43,100
	Opening Cash			98000
	Closing cash			54,900