Question

Exercise 4-16 (Algo) Statement of cash flows; directly from transactions (L04-8] The following transactions occurred during March 20 21 for the Wainwright Corporation. The company owns and operates a wholesale warehouse 1. Issued 39,000 shares of common stock in exchange for $390,000 in cash. 2 Purchased equipment at a cost of $58,000 $19.000 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 $108,000. The company uses the perpetual inventory system 4. Credit sales for the month totaled $129.000. The cost of the goods sold was $79.000 5. Paid $5.900 in rent on the warehouse building for the month of March 6. Paid $6.900 to an insurance company for fire and liability Insurance for a one-year period beginning April 1, 2021 7. Pald $79,000 on account for the merchandise purchased in 3 8. Collected $64,000 from customers on account 9. Recorded depreciation expense of $1.900 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 $49,000

Answer 1

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Part 1
Event	Operating	Investing	Financing
1			$    390,000
2		$   (19,000)
3
4
5	$       (5,900)
6	$       (6,900)
7	$     (79,000)
8	$       64,000
9
Total	$     (27,800)	$   (19,000)	$    390,000
Part 2
Cash Flow from operating Activities:
Cash received from sale		$      64,000
Cash Paid for inventory purchase		$   (79,000)
Cash paid for Rent		$      (5,900)
Cash paid for Insurance		$      (6,900)
Net Cash Flow from operating activities			$    (27,800)
Cash flow from investing activities:
Cash paid for purchase of equipment		$   (19,000)
Net Cash Flow from Investing activities			$    (19,000)
Cash flow from Financing activities:
Cash received from issuance of shares		$   390,000
Net Cash Flow from Financing activities			$    390,000
Net Increase in cash			$    343,200
Cash and equivalents, Beginning			$      49,000
Cash and equivalents, Ending			$    392,200
Non Cash:
Cost of Equipment			$      58,000
Cash Paid			$      19,000
Note Issued			$      39,000