Question

The

following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. Issued 30,000 shares of common stock in exchange for $300,000 in cash. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a notes payable to the seller was signed for the balance owed. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000. Paid $5,000 in rent on the warehouse building for the month of March. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. Paid $70,000 on account for the merchandise purchased in 3. Collected $55,000 from customers on account. Recorded depreciation expense of $1,000 for the month on the equipment.

Required

1. Analyze each transaction by indicating the cash effect and classify each as a financing. investing and operating activity(a transaction can represent more that one type of activity)

2. Prepare a statement of cash flows, using the direct method to present cash flow from operating activities. Assume the cash balance at the beginning of the month was $40,000

OPERATING ------------ INVESTING -------------- FINANCING

1--------------    ----------- ---------------

2 ------------ ------------ ------------

3 --------------- ------------- ------------

4--------------    -------------- -----------

5----------------    ----------------- -------------

6--------------------    ---------------    ---------------

7----------------------- ------------- -----------------

8----------------------    ----------------------- --------------------

9-----------------------    -------------------- ------------------------

6

7

8

9 --------------- ----------- ---------

Answer 1

Cash flow from Operating Activities	$
Outflow of Cash
Purchased inventory on account	(90000)
Paid rent of warehouse	(5000)
Merchandise purchased	(70000)
Insurance paid in advance	(6000)
Total Outflow	(171000)
Inflow Of Cash
Collections from customres	55000
Depreciation	1000
Total Inflo	56000
Net Outflow	(115000)

Cash flow from financing Activites
	$
Inflow Of Cash
Received Cash from issue of stock	300000
Net Inflow of Cash	300000

Cash flow from investing activities	$
Outflow of Cash
Purchase of Equipment for cash	(10000)
Net outflow of cash	(10000)

2.

Cash flow from Operating Activities	$
Outflow of Cash
Purchased inventory on account	(90000)
Paid rent of warehouse	(5000)
Merchandise purchased	(70000)
Insurance paid in advance	(6000)
Total Outflow	(171000)
Inflow Of Cash
Collections from customres	55000
Depreciation	1000
Total Inflo	56000
Net Outflow	(115000)
Beginning Cash	40000
Net cash flow from operations	(75000)