Question

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.

Required:

1. Prepare the statement of cash flows using the indirect method. Include any supplemental disclosures. (Enter any deductions and cash outflows as a negative value.)

Answer 1

Answer-a)-

WICKERSHAM BROTHERS INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED
Particulars		Amount
		$
Cash flow from operating activities
Net Income		78680
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		26320
Change in operating assets & liabilities
Increase in accounts receivable		-16500
Decrease in merchandise inventory		8250
Increase in salaries & wages payable		1650
Decrease in accounts payable		-3300
Net cash flow from operating activities (a)		95100
Cash Flow from Investing activities
Cash paid for equipment		-89000
Net cash flow (used for) Investing activities (b)		-89000
Cash Flow from Financing activities
Cash paid to long-term notes payable		-16500
Cash received from sale of common stock		20000
Cash paid for dividends		-28200
Net cash flow (used for) Financing activities (c)		-24700
Net Change in cash c=a+b+c		-18600
Cash at the beginning of the year		122700
Cash at the end of the year		104100