Question

In: Accounting

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are...

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized.

Current Year Prior Year
Balance Sheet
Assets
Cash $ 104,100 $ 122,700
Accounts receivable 132,000 115,500
Merchandise inventory 99,000 107,250
Property and equipment 188,000 99,000
Less: Accumulated depreciation (54,320 ) (28,000 )
Total assets $ 468,780 $ 416,450
Liabilities:
Accounts payable $ 16,500 $ 19,800
Salaries and Wages Payable 3,300 1,650
Notes payable, long-term 82,500 99,000
Stockholders’ Equity:
Common stock 152,000 132,000
Retained earnings 214,480 164,000
Total liabilities and stockholders’ equity $ 468,780 $

416,450

Income Statement
Sales $ 460,000
Cost of goods sold 240,000
Depreciation expense 26,320
Other expenses 115,000
Net income $ 78,680

Other information from the company’s records includes the following:

  • Bought equipment for cash, $89,000.
  • Paid $16,500 on long-term note payable.
  • Issued new shares of common stock for $20,000 cash.
  • Cash dividends of $28,200 were declared and paid to stockholders.
  • Accounts Payable arose from inventory purchases on credit.
  • Income tax expense ($19,670) and interest expense ($4,950) were paid in full at the end of both years and are included in Other Expenses.

Solutions

Expert Solution

Wickersham Brothers Inc.
Cash Flow Statement - Indirect Method
Cash flow from Operating Activities
Net Income 78680
Adjustments to reconcile NI to CFOA
Add:- Depreciation 26320
Increase in Accounts receivable ( 132000 - 115500 ) -16500
Decrease in Inventory ( 99000 - 107250 ) 8250
DEcrease in Accounts payable ( 16500 - 19800 ) -3300
Increase in Wages payable ( 3300 - 1650 ) 1650
Net Cash From Operating Activities 95100
Cash flow from Investing Activities
Purchase of Equipment -89000
Net cash used by Investing Activities -89000
Cash flow from Financing Activities
Sale of Common stock 20000
Payment of LT note payable -16500
Payment of Cash Dividends -28200
Net cash used by Financing Activities -24700
Net increase in cash -18600
Opening cash balance 122700
Cosing cash Balance 104100
Helping tool for
Cash flow from Operating Activities
Net loss/ Net income
Add:- Depreciation , amortisation , loss
LesS:- gain
Operating Profit before WC Changes
Add:- Decrease In Current Assets
Add:- Increase in current Liabilities
Less :-Increase In Current Assets
Less:- Decrease in current Liabilities
Net Cash From Operating Activities

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