Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1. Issued 44,000 shares of common stock in exchange for $440,000 in cash. 2. Purchased equipment at a cost of $68,000. $24,000 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 $118,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $134,000. The cost of the goods sold was $84,000. 5. Paid $6,400 in rent on the warehouse building for the month of March. 6. Paid $7,400 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. 7. Paid $84,000 on account for the merchandise purchased in 3. 8. Collected $69,000 from customers on account. 9. Recorded depreciation expense of $2,400 for the month on the equipment.

Answer 1

Direct Method Operating Investing Financing 1 440000 2 - 24000 2 3 4 5 -64001 6 - 7400 7 -84000 69000 8 9 -28800 - 24000 440000 387200

$ WAINWREIGHT CORPORATION Cash Flow Statement(Direct Metod) Fot the Month ended March, 2021 Cash Flows from Operating Activities $ Payment of Rent -6400 payment of Prepaid Insurance - 7400 Payment to Account payable -84000 Collection from Account Receivable 69000 Total Adjustments Net Cash provided by Operating Activities Cash flows from Investing Activities Cash Purchase of Equipment -24,000 Net Cash used for Investing Activities Cash flows from Financing Activities Issuance of common stock for cash 440000 Net Cash provided from financing Activities Net Increase in Cash Cash on March, 1 Cash on March, 31 -28800 -28800 -24,000 440,000 387,200 54000 441,200

Non cash investing and financing activities Purchase of Equipment and Issue of Notes payable 44000 134000 -84000 50000 Income Statement Sales Less Cost of Goods sold Gross Profit Less Oerating expenses Rent Depreciation Net Income 6400 2400 -8800 41200

24000 Op. Bal. Common Stock Account Receivable Cash Account 54000 Equipment 440000 Rent 69000 Prepaid Insurance Account Payable 6400 7400 84000 Cl. Bal. 441200 Total 563000 Total 563000

Indirect Method Operating Investing Financing 1 440000 - 24000 3 4 50000 N Сл -6400 6 7 8 9 43600 - 24000 440000 459600

$ 41200 3 WAINWREIGHT CORPORATION Cash Flow Statement(Indirect Method) Fot the Month ended March, 2021 Account Cash Flows from Operating Activities $ Net Income Adjustments to reconcile net income to Depreciation 2400 Increase in Inventory -118000 Increase in Account payable 118000 Increase in Account Receivable - 134000 Decrease in Inventory 84000 Increase in Prepaid Insurance - 7400 Decrease in Account payable -84000 Decrease in Account Receivable 69000 Total Adjustments Net Cash provided by Operating Activities 3 4 4 6 7 8 -70000 -28800

-24,000 N -24,000 Cash flows from Investing Activities Cash Purchase of Equipment Net Cash used for Investing Activities Cash flows from Financing Activities Issuance of common stock for cash Net Cash provided from financing Activities Net Increase in Cash Cash on March, 1 Cash on March, 31 440000 1 440,000 387,200 54000 441,200 Non cash investing and financing activities Purchase of Equipment and issue of Notes payable 44000

Metod is not specified, so both methods are taken. I think Direct Method is required.