Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Whitman Co. at December 31, 20Y2 and 20Y1, is as follows:

	Dec. 31, 20Y2			Dec. 31, 20Y1
Assets
Cash	$ 606,710			$ 655,870
Accounts receivable (net)	552,110			503,570
Inventories	837,260			770,520
Prepaid expenses	19,410			23,050
Land	208,710			315,490
Buildings	964,670			594,580
Accumulated depreciation-buildings	(273,020)			(254,820)
Equipment	339,760			300,320
Accumulated depreciation-equipment	(93,430)			(104,960)
Total assets	$3,162,180			$2,803,620
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$ 600,810			$ 634,010
Bonds payable	177,080			0
Common stock, $20 par	207,000			77,000
Paid-in capital: Excess of issue price over par-common stock	499,000			369,000
Retained earnings	1,678,290			1,723,610
Total liabilities and stockholders' equity	$3,162,180			$2,803,620

The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows:

ACCOUNT Land				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			315,490
Apr. 20	Realized $99,300 cash from sale		106,780	208,710

ACCOUNT Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			594,580
Apr. 20	Acquired for cash	370,090		964,670

ACCOUNT Accumulated Depreciation-Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				254,820
Dec. 31	Depreciation for year		18,200		273,020

ACCOUNT Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			300,320
Jan. 26	Discarded, no salvage		33,000	267,320
Aug. 11	Purchased for cash	72,440		339,760

ACCOUNT Accumulated Depreciation-Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				104,960
Jan. 26	Equipment discarded	33,000			71,960
Dec. 31	Depreciation for year		21,470		93,430

ACCOUNT Bonds Payable				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
May 1	Issued 15-year bonds		177,080		177,080

ACCOUNT Common Stock, $20 par				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				77,000
Dec. 7	Issued 6,500 shares of common stock for $40 per share		130,000		207,000

ACCOUNT Paid-in Capital in Excess of Par-Common Stock				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				369,000
Dec. 7	Issued 6,500 shares of common stock for $40 per share		130,000		499,000

ACCOUNT Retained Earnings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				1,723,610
Dec. 31	Net loss	21,820			1,701,790
Dec. 31	Cash dividends	23,500			1,678,290

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

COOTORISTIO opcroamy CCCVICC. Adjustments to reconcile net loss to net cashflow from operating activities: Changes in current operating assets and liabilities: Net cash flow used for operating activities Cash flows from investing activities: Net cash flow used for investing activities Cash flows from financing activities: Net cash flow from financing activities Cash at the beginning of the year Cash at the end of the vear

Answer 1

Whitman Co. Statement of Cash Flows For the Year Ended December 31, 20Y2 Cash flows from operating activities $ -21,820 Net Income Adjustments to reconcile net income to net cash flow from operating activities Add: Depreciation 39,670 $ Add: Loss on Sale of Land 7,480 Changes in Current operating assets and liabilities Less: Increase in Accounts Receivable (net) $ -48,540 $ -66,740 Less: Increase in Inventories Add: Decrease in Prepaid Expenses 3,640 $-33,200 Less: Decrease in Accounts Payable (merchandise creditors) Net cash flow used for operating activities $-1,19,510 Cash flows from investing activities Sale of Land 99,300 Purchase of Building $-3,70,090 $ -72,440 Purchase of Equipment Net cash flow used for investing activities $-3,43,230 Cash flows from financing activities $2,60,000 $-23,500 $1,77,080 Issue of Common Stock Dividends Paid Issue of Bonds Payable Net cash flow from financing activities $ 4,13,580 Net change in cash and cash equivalence Cash at the beginning of the year Cash at the end of the year $ -49,160 $6,55,870 6,06,710

Workings: Depreciation for Building 18,200 21,470 Depreciation for Equipment Depreciation + $39,670 = Book Value Cash Received Loss on Sale of Land 106,780-99,300 $ 7,480 = Book Value Cash Received Loss on Sale of Land 106,780 99,300 $ 7,480 Increase in Accounts Receivable - Opening Balance Closing Balance 503,570-552,110 = $ -48,540 Opening Balance- Closing Balance Increase in Inventories 770,520-837,260 = $-66,740 Opening Balance - Closing Balance 23,050 19,410 $ 3,640 Prepaid Expense De ease

Decrease in Accounts Payable Closing Balance Opening Balance 600,810 634,010 -33,200 = No of Shares x issue price Issue of Common Stock 6,500 x $40 $2,60,000 Issue of Bonds Payable Closing Balance - Opening Balance = 177,080- 0 = $1,77,080