Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. 1. Issued 41,000 shares of common stock in exchange for $410,000 in cash. 2. Purchased equipment at a cost of $62,000. $21,000 cash was paid and a note payable to the seller was signed for the balance owed. 3. Purchased inventory on account at a cost of $112,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $131,000. The cost of the goods sold was $81,000. 5. Paid $6,100 in rent on the warehouse building for the month of March. 6. Paid $7,100 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. 7. Paid $81,000 on account for the merchandise purchased in 3. 8. Collected $66,000 from customers on account. 9. Recorded depreciation expense of $2,100 for the month on the equipment. Required: 1. Analyze each transaction by indicating the cash effect and classify each as a financing, investing, and/or operating activity (a transaction can represent more than one type of activity). 2. Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $51,000.

Answer 1

Partial - Statement of Cash Flow
For the Month Ended March 31, 2021
Cash Flow from Operating Activiteis
Rent Paid	-$6,100.00
Paid to insurance Company	-$7,100.00
Paid for Inventory Purchased on account	-$81,000.00
Collected amount from Accoutn Receivable	$66,000.00
Net Cash Flow from Operating Activities		-$28,200.00
Cash Flow from Investing Activities
Cash Paymnet made for Purchase of Equipment	-$21,000.00
Net Cash Flow from Investing Activities		-$21,000.00
Cash Flow from Financing Activities
Proceed from Stock received	$410,000.00
Net Cash Flow from Financing Activities		$410,000.00
Net Increase in Cash		$360,800.00
Add: Beginning Cash Balance
Ending Cash Balance		$360,800.00
Non Cash Investing & Financing Activities
Cost of Equipment	$62,000.00
Cash Paid	$21,000.00
Note Issued	$41,000.00