Question

In: Accounting

Presented below is the comparative balance sheet for Wildhorse Inc., a private company reporting under ASPE,...

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.

Solutions

Expert Solution

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

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