Question

The comparative balance sheets for 2016 and 2015 and the statement of income for 2016 are given below for Wright Company. Additional information from Wright's accounting records is provided also.

  

WRIGHT COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s)
	2016		2015
Assets
Cash	$	79	$	40
Accounts receivable		83		85
Short-term investment		33		12
Inventory		83		80
Land		58		70
Buildings and equipment		525		420
Less: Accumulated depreciation		(127)		(85)
	$	734	$	622
Liabilities
Accounts payable	$	29	$	37
Salaries payable		4		7
Interest payable		4		2
Income tax payable		6		11
Notes payable		0		21
Bonds payable		162		120
Shareholders' Equity
Common stock		265		220
Paid-in capital—excess of par		145		110
Retained earnings		119		94
	$	734	$	622

WRIGHT COMPANY Income Statement For Year Ended December 31, 2016 ($ in 000s)
Revenues:
Sales revenue			$	370
Expenses:
Cost of goods sold	$	150
Salaries expense		49
Depreciation expense		42
Interest expense		11
Loss on sale of land		6
Income tax expense		52		310
Net income			$	60

Additional information from the accounting records:
a.	Land that originally cost $12,000 was sold for $6,000.
b.	The common stock of Microsoft Corporation was purchased for $21,000 as a short-term investment not classified as a cash equivalent.
c.	New equipment was purchased for $105,000 cash.
d.	A $21,000 note was paid at maturity on January 1.
e.	On January 1, 2016, bonds were sold at their $42,000 face value.
f.	Common stock ($45,000 par) was sold for $80,000.
g.	Net income was $60,000 and cash dividends of $35,000 were paid to shareholders.

  

Required:

Prepare the statement of cash flows of Wright Company for the year ended December 31, 2016. Present cash flows from operating activities by the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 5,000 should be entered as 5).)

Answer 1

Cash flow from direct method :
Cash flow from operating activity
Cash received from customer (370+2)	372
Cash paid to supplier (150+8+3)	-161
Cash paid for income tax (52+5)	-57
Cash paid for interest (11+2)	-9
Cash paid for salary (49+3)	-52
Net cash flow from operating activity		93
Cash flow from investing activity
Land sold	6
Equipment purchased	-105
Short term investment	-21
Net cash flow from investing activity		-120
Cash flow from financing activity
Issue bonds	42
Common stock issued	80
Dividend paid	-35
Note payable paid	-21
Net cash flow from financing activity		66
Net cash flow		39
Beginning cash		40
Ending cash		79

Cash received from Customer
Sales revenue	370
Beginning accounts receivable	85
Less: closing accounts receivable	-83
Cash received from customer	372
Cash paid to suppliers
Cost of goods sold	150
Less: beginning inventory	-80
Add: Ending inventory	83
Less: closing accounts payable	-29
Add: beginning accounts payable	37
Cash paid to suppliers	161
Cash paid for income tax
Income tax expenses	52
Add: beginning income tax payable	11
Less: Ending	-6
	57
Cash paid for interest Expenses
Interest Expenses	11
Add: beginning	2
Less: Ending	-4
	9
Cash paid for salaries Expense
Salaries Expenses	49
Add: Beginning salaries payable	7
Less: Ending Salaries payable	-4
	52