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	$ 749,880			$ 807,890
Accounts receivable (net)	682,390			622,400
Inventories	1,034,830			952,350
Prepaid expenses	24,000			28,500
Land	257,960			389,940
Buildings	1,192,310			734,880
Accumulated depreciation-buildings	(337,450)			(314,950)
Equipment	419,930			371,190
Accumulated depreciation-equipment	(115,480)			(129,730)
Total assets	$3,908,370			$3,462,470
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$ 742,590			$ 783,620
Bonds payable	218,870			0
Common stock, $20 par	257,000			95,000
Paid-in capital: Excess of issue price over par-common stock	618,000			456,000
Retained earnings	2,071,910			2,127,850
Total liabilities and stockholders' equity	$3,908,370			$3,462,470

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			389,940
Apr. 20	Realized $122,700 cash from sale		131,980	257,960

ACCOUNT Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			734,880
Apr. 20	Acquired for cash	457,430		1,192,310

ACCOUNT Accumulated Depreciation-Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				314,950
Dec. 31	Depreciation for year		22,500		337,450

ACCOUNT Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			371,190
Jan. 26	Discarded, no salvage		40,800	330,390
Aug. 11	Purchased for cash	89,540		419,930

ACCOUNT Accumulated Depreciation-Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				129,730
Jan. 26	Equipment discarded	40,800			88,930
Dec. 31	Depreciation for year		26,550		115,480

ACCOUNT Bonds Payable				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
May 1	Issued 10-year bonds		218,870		218,870

ACCOUNT Common Stock, $20 par				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				95,000
Dec. 7	Issued 8,100 shares of common stock for $40 per share		162,000		257,000

ACCOUNT Paid-in Capital in Excess of Par-Common Stock				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				456,000
Dec. 7	Issued 8,100 shares of common stock for $40 per share		162,000		618,000

ACCOUNT Retained Earnings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				2,127,850
Dec. 31	Net loss	26,930			2,100,920
Dec. 31	Cash dividends	29,010			2,071,910

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.

/takeAssignment/takeAssignmentMa Calculator eBook Statement of Cash Flows For the Year Ended December 31, 20Y2 Cash flows from operating activities: Net loss S 26,930V Adjustments to reconcile net loss to net cashfiow fron oper aling activities: Depreciation Loss on sale of land Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Decrease in prepaid expenses Decrease in accounts payable y Net cash flow used for operating activities Cash lows from investing activities: Caslh received from iand sold y Cash paid for acquisition of building v Cash paid for purchase of equiprient Net cash flow used for investing activities Cash flows from financing activities: Cash neceived from issuance of bonds payable Cash received from issuance of common stock Cash paid for dividends Net cash flow from financing activities Change in cash 58.010 Cash at the beginning of the year 807.890 Cash at the end of the year 749.880 Feedback check My Work mnte fhe iocreaseR and deerAR in the rument asetahititviaccounts Over the netiod How dn these inicreases orderraase Check My Work All work saved.

Answer 1

A Cash flow statement provides the following information:
1) Information about company's cash receipt and cash payment during an accounting period.
2) Information about company's operating, investing and financing activities.
3) Information access the company's liquidity, solvency and financing flexibility.
Under the indirect method, net income is converted operating cash flow by making adjustments for the transaction that effect net income but are non cash transactions. The adjustment includes eliminating non cash expenses, non operating items and the changes in the balance sheet account on account of accrual accounting events.
> Cash flow from operating activities (CFO), consists of the inflows and outflows of cash resulting from revenue and expense transactions that affect a firm's net income.
> Cash flow from investing activities (CFI) consists of the inflow and outflows of cash resulting from the acquisition of long term assets and investment.
> Cash Flow from financing activities (CFF) consists of the inflow and outflows of cash resulting from transactions affecting a firm's capital structure.

Amount Whitman Co. Statement of Cash Flows For year ended December 31, 20Y2 Particulars Amount Cash Flow from Operating Activity Net Loss ($ 26,930) Adjustment reconcile net income net cash flow from operating activities Depreciation $49,050 Loss on Sale of Land ($131980 - $122700] $9,280 Changes in current operating assets and liabilities: Increase in Accounts Receivable ($59,990) increase in inventory ($82,480) Decrease in Prepiad Expense $4,500 Decrease in Accounts payable ($41,030) Net Cash Flow used in Operating Activity Cash Flow from (used for) Investing Activity Cash received from land sold $1,22,700 Cash paid for acquisition of building ($4,57,430) Cash paid for purchase of equipment ($89,540) Net Cash Flow used in Investing Activity Cash Flow from (used for) Financing Activity Cash received from issuance of bonds payable $2,18,870 Cash received from issuance of common stock $3,24,000 Cash paid for dividends ($29,010) Net Cash Flow from Financing Activity Change in cash Cash at the beginning of the year Cash at the end of the year ($1,47,600) ($4,24,270) $5,13,860 ($58,010) $8,07,890 $ 7,49,880

Working Depreciation Expense Depreciation on Building for the year Depreciation on Equipment for the year Depreciation Expense $22,500 $26,550 $49,050 Dec 31, 20Y1 Particulars Dec 31, 20Y2 Assets (A) Accounts Receivable $6,82,390 inventory $10,34,830 Prepaid Expenses $24,000 Accounts Payable $7,42,590 Increase in Assets is Cash Outflow and Decrease in Assets in Cash Inflow Increase in Liability is Cash Inflow and Decrease in Liability in Cash Outflow (B) $6,22,400 $9,52,350 $28,500 $7,83,620 Increase /(Decrease) (A) - (B) $59,990 $82,480 ($4,500) ($41,030)