Question

In: Accounting

Presented below are changes in all the account balances of Wildhorse Furniture Co. during the current...

Presented below are changes in all the account balances of Wildhorse Furniture Co. during the current year, except for retained earnings.

Increase
(Decrease)

Increase
(Decrease)
Cash $70,140 Accounts Payable $(52,210 )
Accounts Receivable (net) 52,900 Bonds Payable 82,530
Inventory 128,000 Common Stock 134,900
Investments (48,240 ) Paid-In Capital in Excess of Par—Common Stock 13,110


Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $28,270 which was paid in the current year.

Solutions

Expert Solution

Net income can be calculated by preparing the statement of cash flows by indirect method.

Statement of cash flows

I. Cash flows from operating activities
Net income 52,740
Adjustments to reconcile net income to
Increase in Accounts receivable - 52,900
Increase in Inventory - 128,000
Decrease in Accounts payable - 52,210
Net cash used in operating activities - 180,370
II. Cash flows from investing activities
Sale of investments 48,240
Net Cash flows from investing activities 48,240
III. Cash flows from financing activities
Issue of bonds payable 82,530
Issue of common stock 148,010
Dividend paid - 28,270
Net Cash flows from financing activities 202,270
Net increase in cash (I + II + III) 70,140

(i)

Net increase in cash = Net cash used in operating activities + Net Cash flows from investing activities + Net Cash flows from financing activities

70,140 = Net cash used in operating activities + 202,270 + 48,240

Net cash used in operating activities = - 180,370

(ii)

Net cash used in operating activities = Net income - Increase in Accounts receivable - Increase in Inventory - Decrease in Accounts payable

- 180,370 = Net income - 52,900 - 128,000 - 52,210

Net income = 52,740

ekkarill92 answered 1 year ago
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