Question

Exercise 5-14

The comparative balance sheets of Whispering Inc. at the beginning and the end of the year 2017 are as follows.

WHISPERING INC. BALANCE SHEETS
		Dec. 31, 2017		Jan. 1, 2017		Inc./Dec.
Assets
Cash		$ 48,040		$ 16,040		$32,000	Inc.
Accounts receivable		95,250		89,210		6,040	Inc.
Equipment		43,250		23,210		20,040	Inc.
Less: Accumulated Depreciation-Equipment		21,250		11,000		10,250	Inc.
Total		$165,290		$117,460
Liabilities and Stockholders’ Equity
Accounts payable		$ 24,250		$ 16,210		8,040	Inc.
Common stock		103,040		81,210		21,830	Inc.
Retained earnings		38,000		20,040		17,960	Inc.
Total		$165,290		$117,460

Net income of $48,250 was reported, and dividends of $30,290 were paid in 2017. New equipment was purchased and none was sold.

Prepare a statement of cash flows for the year 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

WHISPERING INC. Statement of Cash Flows

	$
Adjustments to reconcile net income to

$

$

Answer 1

Preparing Cash Flow Statement:-

WHISPERING INC.

Statement of Cash Flows

Description	Amount	Amount
Cash Flow From Operating Activities:-
Net Income	$48,250
Adjustments to reconcile Net Income to:-
Add:- Depreciation Expense	$10,250
		$58,500
Less:- Increase in Current Assets:-
Accounts Receivable	($6,040)
Add:- Increase in Current Liabilities:-
Accounts Payable	$8,040
		$2,000
Cash Generated From Operating Activities		$60,500
Cash Flow From Investing Activities:-
Purchase of New Equipment	($20,040)
Net Cash used in Investing Activities		($20,040)
Cash Flow From Financing Activities:-
Proceeds from issuance of Common Stock	$21,830
Dividends Paid	($30,290)
Net Cash used in Financing Activities		($8,460)
Net Increase in Cash		$32,000
Add:- Cash at the beginning of period		$16,040
Cash at the end of period		$48,040

Working Notes:-

(1) An Increase of $10,250 in Accumulated Depreciation, Equipment treated as Depreciation Expense during the year.

(2) An Increase of $20,040 in Equipment treated as Purchase of New Equipment and showed under Investing Activities head.

(3) An Increase in Common Stock of $21,830 treated as Issuance of Common Stock and showed under Financing Activities head.