Question

P11-43. Statement of Cash Flows (Indirect Method)

Wolff Company’s income statement and comparative balance sheets follow.

WOLFF COMPANY

Income Statement
For Year Ended December 31, 2017

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $635,000

Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $430,000

Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,000

Insurance expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000

Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,000 579,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,000

WOLFF COMPANY Balance Sheet

Dec. 31, 2017   Dec. 31, 2016

Cash...................................................$11,000$ 5,000

Accounts receivable. . . . . . . . . . . . . . . 41,000     32,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . 90,000 60,000

Prepaid insurance. . . . . . . . . . . .. . . . . 5,000 7,000

PPE . . . . . . . . . . . . . . . . .. . . . . . . . . 250,000 195,000

Accumulated depreciation . . . . . . . .. (68,000) (51,000)

Total assets. . . . . . . . . . . . . . . . . . . $329,000 $248,000

Liabilities and Stockholders’ Equity

Dec. 31, 2017 Dec. 31, 2016

Accounts payable...............................$ 7,000$ 10,000

Wages payable . . . . . . . . . . . . . . . . . . 9,000 6,000

Income tax payable . . . . . . . . . . .. . . . 7,000 8,000
Bonds payable . . . . . . . . . . . . . . . . . . 130,000 75,000

Common stock. . . . . . . . . . . . . . . . . . 90,000 90,000

Retained earnings. . . . . . . . . . . . . . . 86,000    59,000

Total liabilities and equity . . . . . . . . $329,000 $248,000

Cash dividends of $29,000 were declared and paid during 2017. Also in 2017, PPE was purchased for cash, and bonds payable were issued for cash. Bond interest is paid semiannually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required

a. Compute the change in cash that occurred during 2017.
b. Prepare a 2017 statement of cash flows using the indirect method.

PLEASE CREATE SPREADSHEET AND SHOW FORMULAS.

Answer 1

WOLFF COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net Income		$   56,000
Adjustments to reconcile net income:
Depreciation expenses	$   17,000
Increase in Accounts Receiveble	$   (9,000)
Decrease in Inventory	$ (30,000)
Decrease in prepaid insurance	$      2,000
Decrease in Accounts Payable	$   (3,000)
Increase in wages payable	$      3,000
Decrease in Income tax Payable	$   (1,000)
		$ (21,000)
Net cash provided by operating activities		$   35,000
Cash flows from investing activities
Purchase of PPE	$ (55,000)
Net cash used in investing activities		$ (55,000)
Cash flows from financing activities
Cash received from issuance of Bonds	$   55,000
Dividends Paid	$ (29,000)
Net cash provided by financing activities		$   26,000
Net change in cash		$      6,000
Cash and cash equivalents at beginning of period		$      5,000
Cash and cash equivalents at end of period		$   11,000

Net Change in Cash = $6,000

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