Question

The following data is supplied from the comparative balance sheets and income statement information from Westerman, Inc.

	2020	2019
Cash	88,000	64,000
Accounts Receivable	48,000	32,000
Inventory	56,000	64,000
Prepaid Insurance	32,000	40,000
Property, plant & equipment	88,000	64,000
Accumulated Depreciation	(24,000)	(16,000)
Total	288,000	248,000
Accounts Payable	80,000	64,000
Salaries Payable	56,000	64,000
Long-term notes payable	40,000	48,000
Common Stock	72,000	48,000
Retained Earnings	40,000	24,000
Total	288,000	248,000

Additional Information:

1. Net Income for 2020 was $40,000.
2. Depreciation expense was $8,000 during 2020.
3. No long term assets were sold during the year.
4. Westerman purchased land for $24,000 during 2020.
5. Notes payable of $8,000 were repaid during the year.
6. Westerman issued new common stock for $24,000 in 2020.
7. Westerman paid cash dividends of $24,000 during the year.

Prepare the Statement of Cash Flows for Westerman using the indirect method.

Provide the following amounts:

What is the total of the net cash flows from operating activities?  

What is the total of the net cash flows from investing activities?   

What is the total of the net cash flows from financing activities?   

Answer 1

Answer)

Cash Flow Statement (Indirect Method)
Cash Flow from Operating Activities	Amount (In $)	Amount (In $)
Net Income	40,000
Depreciation Expense	8,000
Changes in Current Assets and Current Liabilities:
Increase in accounts receivable	(16,000)
Decrease in inventory	12,000
Decrease in Prepaid insurance	8,000
Increase in accounts payable	16,000
Decrease in Salaries payable	(12,000)
Net cash generated from (used in) operating activities (A)		56,000
Cash Flow from Investing Activities
Purchase of Land	(24,000)
Net cash generated from (used in) Investing activities (B)		(24,000)
Cash Flow from Financing Activities
Dividends Paid	(24,000)
Issue of Common Stock	24,000
Retirement of Notes Payable	(8,000)
Net cash generated from (used in) Financing activities (C )		(8,000)
Net cash generated from (used in) Operating Activities, Investing Activities and Financing activities (A) + (B) + (C )		24,000
Opening Balance of cash and Cash Equivalents		64,000
Closing Balance of cash and Cash Equivalents		88,000

Net cash flow from Operating Activities is $ 56,000.

Net cash flow from investing Activities is - $ 24,000.

Net cash flow from financing Activities is - $ 8,000.

Working Notes:

Property, Plant and Equipment
Debit	Credit
Particulars	Amount (In $)	Particulars	Amount (In $)
Balance b/d	64,000
Cash	24,000
		Balance c/d	88,000
Total	88,000	Total	88,000

Accumulated Depreciation
Debit	Credit
Particulars	Amount (In $)	Particulars	Amount (In $)
		Balance b/d	16,000
		Depreciation Expense	8,000
Balance c/d	24,000
Total	24,000	Total	24,000

Long Term Notes Payable
Debit	Credit
Particulars	Amount (In $)	Particulars	Amount (In $)
Cash	8,000	Balance b/d	48,000
Balance c/d	40,000
Total	48,000	Total	48,000

Common Stock
Debit	Credit
Particulars	Amount (In $)	Particulars	Amount (In $)
		Balance b/d	48,000
		Cash	24,000
Balance c/d	72,000
Total	72,000	Total	72,000

Retained earnings
Debit	Credit
Particulars	Amount (In $)	Particulars	Amount (In $)
Dividends paid	24,000	Balance b/d	24,000
		Net Income	40,000
Balance c/d	40,000
Total	64,000	Total	64,000