Question

Statement of Cash Flows

The following is a list of items for Witts Company's 2016 statement of cash flows:

receipt from sale of equipment, $2,700

increase in inventory, $3,900

net income, $13,500

payment for purchase of building, $29,000

depreciation expense, $8,700

receipt from issuance of bonds, $8,000

increase in prepaid expenses, $800

loss on sale of equipment, $2,200

payment of dividends, $5,200

decrease in accounts receivable, $1,700

issuance of common stock for land, $6,900

decrease in accounts payable, $1,500

beginning cash balance, $10,200

Required:

1. Prepare the statement of cash flows. Use a minus sign to indicate cash outflows, a decrease in cash or cash payments.

WITTS COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:
	$
Adjustment for noncash income items:
Adjustments for cash flow effects from working capital items:
		$
Investing Activities:
	$
Financing Activities:
	$
		$
Cash, January 1, 2016
Cash, December 31, 2016		$

2. If Witts Company uses IFRS, and chooses to show dividends as an operating activity, which of the following will result?

Witts Company would report net cash provided by operating activities of $25,100.

Witts Company would report net cash provided by operating activities of $14,700.

Witts Company would report net cash provided by financing activities of $2,800.

Witts Company would report net cash used by financing activities of $2,400.

Answer 1

1)
WITTS COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:	$	$
net income	13,500
Adjustment for noncash income items:
depreciation expense	8,700
loss on sale of equipment	2,200
Adjustments for cash flow effects	24,400
from working capital items:
increase in inventory	-3,900
increase in prepaid expenses	-800
decrease in accounts receivable	1,700
decrease in accounts payable	-1,500
		19,900
Investing Activities:
receipt from sale of equipment	2,700
payment for purchase of building	-29,000
		-26,300
Financing Activities:
receipt from issuance of bonds	8,000
payment of dividends	-5,200
		2,800
Cash, January 1, 2016		10,200
Cash, December 31, 2016		6,600
2)
Witts Company would report net cash provided by operating activities of $14,700.
Net cash provided by operating activities = $19900
Less: Payment of dividend = $5200
Net cash provided by operating activities after adjustment of dividend = $14700