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	$ 792,160			$ 851,660
Accounts receivable (net)	720,870			657,490
Inventories	1,093,180			1,006,040
Prepaid expenses	25,350			30,100
Land	272,500			411,920
Buildings	1,259,530			776,320
Accumulated depreciation-buildings	(356,470)			(332,710)
Equipment	443,610			392,120
Accumulated depreciation-equipment	(121,990)			(137,040)
Total assets	$4,128,740			$3,655,900
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$ 784,460			$ 827,810
Bonds payable	231,210			0
Common stock, $20 par	273,000			101,000
Paid-in capital: Excess of issue price over par-common stock	654,000			482,000
Retained earnings	2,186,070			2,245,090
Total liabilities and stockholders' equity	$4,128,740			$3,655,900

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			411,920
Apr. 20	Realized $129,700 cash from sale		139,420	272,500

ACCOUNT Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			776,320
Apr. 20	Acquired for cash	483,210		1,259,530

ACCOUNT Accumulated Depreciation-Buildings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				332,710
Dec. 31	Depreciation for year		23,760		356,470

ACCOUNT Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance			392,120
Jan. 26	Discarded, no salvage		43,100	349,020
Aug. 11	Purchased for cash	94,590		443,610

ACCOUNT Accumulated Depreciation-Equipment				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				137,040
Jan. 26	Equipment discarded	43,100			93,940
Dec. 31	Depreciation for year		28,050		121,990

ACCOUNT Bonds Payable				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
May 1	Issued 20-year bonds		231,210		231,210

ACCOUNT Common Stock, $20 par				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				101,000
Dec. 7	Issued 8,600 shares of common stock for $40 per share		172,000		273,000

ACCOUNT Paid-in Capital in Excess of Par-Common Stock				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				482,000
Dec. 7	Issued 8,600 shares of common stock for $40 per share		172,000		654,000

ACCOUNT Retained Earnings				ACCOUNT NO.
				Balance
Date	Item	Debit	Credit	Debit	Credit
20Y2
Jan. 1	Balance				2,245,090
Dec. 31	Net loss	28,420			2,216,670
Dec. 31	Cash dividends	30,600			2,186,070

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.

Whitman Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
	$
Adjustments to reconcile net loss to net cashflow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow used for operating activities		$
Cash flows from investing activities:
	$
Net cash flow used for investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Whitman Co.
Cash Flow Statement
For the Year Ended December 31, 20Y2
Cash Flow from Operating Activities:
Net Income		$        (28,420.00)
Adjustments to reconcile net loss to net cash flow from operating activities:
Loss on sale of land	$            9,720.00
Depreciation expense	$          52,260.00
Changes in current operating assets and liabilities:
Decrease in accounts payable	$        (43,350.00)
Increase in Accounts receivables	$        (63,380.00)
Increase in Inventory	$        (87,140.00)
Decrease in Prepaid Expenses	$            4,750.00
		$    (1,27,140.00)
A. Cash Flow from Operating Activities		$    (1,55,560.00)
Cash Flow from Investing Activities:
Purchase of Building	$    (4,83,210.00)
Sale of Land	$      1,29,700.00
Purchase of Equipment	$        (94,590.00)
B. Cash flow from Investing Activities		$    (4,48,100.00)
Cash Flow from Financing Activities:
Dividend paid	$        (30,600.00)
Proceeds from Bonds issue	$      2,31,210.00
Issue of Common shares	$      3,44,000.00
C. Cash Flow from Financing Activities		$      5,44,610.00
Increase (Decrease) in cash [A+B+C]		$        (59,050.00)
Add: cash at the beginning of the year		$      8,51,660.00
Cash at the end of the year		$      7,92,610.00

General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.