Question

Problem 23-07 b-c (Part Level Submission) Windsor Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Windsor as of May 31, 2020, are as follows. The company is preparing its statement of cash flows. WINDSOR COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31 2020 2019 Current assets    Cash $28,200 $20,100    Accounts receivable 75,300 58,100    Inventory 219,000 249,800    Prepaid expenses 9,000 6,900      Total current assets 331,500 334,900 Plant assets    Plant assets 600,000 505,700    Less: Accumulated depreciation—plant assets 148,800 126,100      Net plant assets 451,200 379,600 Total assets $782,700 $714,500 Current liabilities    Accounts payable $121,800 $114,800    Salaries and wages payable 46,800 72,700    Interest payable 27,300 25,100      Total current liabilities 195,900 212,600 Long-term debt    Bonds payable 70,000 100,000      Total liabilities 265,900 312,600 Stockholders’ equity    Common stock, $10 par 370,000 280,000    Retained earnings 146,800 121,900      Total stockholders’ equity 516,800 401,900 Total liabilities and stockholders’ equity $782,700 $714,500 WINDSOR COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2020 Sales revenue $1,254,100 Cost of goods sold 725,100    Gross profit 529,000 Expenses    Salaries and wages expense 250,100    Interest expense 75,400    Depreciation expense 22,700    Other expenses 8,100      Total expenses 356,300 Operating income 172,700    Income tax expense 42,600 Net income $130,100 The following is additional information concerning Windsor’s transactions during the year ended May 31, 2020. 1. All sales during the year were made on account. 2. All merchandise was purchased on account, comprising the total accounts payable account. 3. Plant assets costing $94,300 were purchased by paying $24,300 in cash and issuing 7,000 shares of stock. 4. The “other expenses” are related to prepaid items. 5. All income taxes incurred during the year were paid during the year. 6. In order to supplement its cash, Windsor issued 2,000 shares of common stock at par value. 7. Cash dividends of $105,200 were declared and paid at the end of the fiscal year.

(b) Prepare a statement of cash flows for Windsor Company for the year ended May 31, 2020, using the direct method. (A reconciliation of net income to net cash provided is not required.)

c. using the indirect method, calculate onlly the net cash flow from operating activities for windsor company for the year ended May 31, 2020

Answer 1

b.)

WINDSOR COMPANY
Statement of cash flows
For the year ended May 31,2020
Particulars	Amt. in $	Workings
Cash flows from operating activities
Cash received from customers	1236900	58100+1254100-75300
Cash payment for merchandise	-687300	-(114800+694300-121800)
Cash payment for other expenses	-10200	6900-8100-9000
Cash payment for salaries and wages	-276000	-(72700+250100-46800)
Cash payment for income taxes	-42600
Net cash flow from operating activities	220800
Cash flows from investing activities
Cash paid for purchase of plant assets	-24300
Net cash flow from investing activities	-24300
Cash flows from financing activities
Cash received from sale of common stock	20000	(370000-280000)-(94300-24300)
Cash payment for interest	-73200	-(25100+75400-27300)
Cash payment for Bonds	-30000	70000-100000
Cash paid for dividends	-105200
Net cash flow from financing activities	-188400
Change in cash	8100
Cash at the beginning of the year	20100
Cash at the end of the year	28200
Non cash investing and financing activities
Purchase of Plant asset by issue of 7000 shares	-70000	24300-94300

c.)

WINDSOR COMPANY
Statement of cash flows
For the year ended May 31,2020
Particulars	Amt. $	Workings
Cash flows from operating activities
Net income before taxes	172700
Adjustments for non cash effects:
Depreciation expense	22700
Interest expense	75400
Change in operating assets and liabilities:
Increase in accounts receivable	-17200	58100-75300
Increase in prepaid expenses	-2100	6900-9000
Decrease in inventory	30800	249800-219000
Increase in accounts payable	7000	121800-114800
Decrease in salaries and wages payable	-25900	46800-72700
Income tax expense	-42600
Net cash flow from operating activities	220800