Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Whitman Co. at December 31, 20Y2 and 20Y1, is as follows:

	Dec. 31, 20Y2			Dec. 31, 20Y1
Assets
Cash	$ 842,190			$ 907,230
Accounts receivable (net)	766,390			699,020
Inventories	1,162,220			1,069,580
Prepaid expenses	26,950			32,000
Land	289,710			437,940
Buildings	1,339,080			825,350
Accumulated depreciation-buildings	(378,990)			(353,720)
Equipment	471,630			416,880
Accumulated depreciation-equipment	(129,700)			(145,700)
Total assets	$4,389,480			$3,888,580
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$ 834,000			$ 880,090
Bonds payable	245,810			0
Common stock, $20 par	289,000			107,000
Paid-in capital: Excess of issue price over par-common stock	694,000			512,000
Retained earnings	2,326,670			2,389,490
Total liabilities and stockholders' equity	$4,389,480			$3,888,580

The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows:

ACCOUNT Land				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			437,940
Apr. 20	Realized $137,900 cash from sale		148,230	289,710

ACCOUNT Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			825,350
Apr. 20	Acquired for cash	513,730		1,339,080

ACCOUNT Accumulated Depreciation-Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				353,720
Dec. 31	Depreciation for year		25,270		378,990

ACCOUNT Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			416,880
Jan. 26	Discarded, no salvage		45,900	370,980
Aug. 11	Purchased for cash	100,650		471,630

ACCOUNT Accumulated Depreciation-Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				145,700
Jan. 26	Equipment discarded	45,900			99,800
Dec. 31	Depreciation for year		29,900		129,700

ACCOUNT Bonds Payable				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
May 1	Issued 15-year bonds		245,810		245,810

ACCOUNT Common Stock, $20 par				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				107,000
Dec. 7	Issued 9,100 shares of common stock for $40 per share		182,000		289,000

ACCOUNT Paid-in Capital in Excess of Par-Common Stock				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				512,000
Dec. 7	Issued 9,100 shares of common stock for $40 per share		182,000		694,000

ACCOUNT Retained Earnings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				2,389,490
Dec. 31	Net loss	30,250			2,359,240
Dec. 31	Cash dividends	32,570			2,326,670

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Whitman Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
	$
Adjustments to reconcile net loss to net cashflow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow used for operating activities		$
Cash flows from investing activities:
	$
Net cash flow used for investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Solution

Whitman Co.
Cash Flow Statement
For the Year Ended December 31, 20Y2
Cash Flow from Operating Activities:
Net Income		-$ 30,250
Adjustments to reconcile net loss to net cash flow from operating activities
Loss on sale of land	$ 10,330
Depreciation expense	$ 55,170
Changes in current operating assets and liabilities:
Decrease in accounts payable	-$ 46,090
Increase in Accounts receivables	-$ 67,370
Increase in Inventory	-$ 92,640
Decrease in Prepaid Expenses	$ 5,050
		-$ 135,550
A. Cash Flow from Operating Activities		-$ 165,800
Cash Flow from Investing Activities:
Purchase of Building	-$ 513,730
Sale of Land	$ 137,900
Purchase of Equipment	-$ 100,650
B. Cash flow from Investing Activities		-$ 476,480
Cash Flow from Financing Activities:
Repayment of long term notes payable
Dividend paid	-$ 32,570
Proceeds from Bonds issue	$ 245,810
Issue of Common shares	$ 364,000
C. Cash Flow from Financing Activities		$ 577,240
Increase (Decrease) in cash [A+B+C]		-$ 65,040
Add: cash at the beginning of the year		$ 907,230
Cash at the end of the year		$ 842,190