Problem

Format of a Statement of Cash FlowsThe accounting staff of Welch Company has assembled the...

Format of a Statement of Cash Flows

The accounting staff of Welch Company has assembled the following information for the year ended December 31, 2015:

Cash sales

$ 230,000

Credit sales

3,450,000

Collections on accounts receivable

2,810,000

Cash transferred from the money market fund to the general bank account

200,000

Interest and dividends received

40,000

Purchases (all on account)

1,822,000

Payments on accounts payable to merchandise suppliers

1,220,000

Cash payments for operating expenses

930,000

Interest paid

130,000

Income taxes paid

65,000

Loans made to borrowers

690,000

Collections on loans (excluding receipts of interest)

300,000

Cash paid to acquire plant assets

1,700,000

Book value of plant assets sold

520,000

Loss on sales of plant assets

30,000

Proceeds from issuing bonds payable

2,000,000

Dividends paid

250,000

Cash and cash equivalents, Jan. 1

278,000

Instructions

Prepare a statement of cash flows in the format illustrated in Exhibit 13–1. Place brackets around amounts representing cash outflows. Use the direct method of reporting cash flows from operating activities.

Some of the items above will be listed in your statement without change. However, you will have to combine certain given information to compute the amounts of (1) collections from customers, (2) cash paid to suppliers and employees, and (3) proceeds from sales of plant assets. (Hint: Not every item listed above is used in preparing a statement of cash flows.)

EXHIBIT 13–1

Allison Corporation Statement of Cash Flows

ALLISON CORPORATION

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2015

Cash flows from operating activities:

 

 

Cash received from customers

$ 870,000

 

Interest and dividends received

10,000

 

Cash provided by operating activities

 

$ 880,000

Cash paid to suppliers and employees

$ (764,000)

 

Interest paid

(28,000)

 

Income taxes paid

(38,000)

 

Cash disbursed for operating activities

 

(830,000)

Net cash flows from operating activities

 

$ 50,000

Cash flows from investing activities:

 

 

Purchases of marketable securities

$ (65,000)

 

Proceeds from sales of marketable securities

40,000

 

Loans made to borrowers

(17,000)

 

Collections on loans

12,000

 

Purchases of plant assets

(160,000)

 

Proceeds from sales of plant assets

75,000

 

Net cash flows from investing activities

 

(115,000)

Cash flows from financing activities:

 

 

Proceeds from short-term borrowing

$ 45,000

 

Payments to settle short-term debts

(55,000)

 

Proceeds from issuing bonds payable

100,000

 

Proceeds from issuing capital stock

50,000

 

Dividends paid

(40,000)

 

Net cash flows from financing activities

 

100,000

Net increase (decrease) in cash

 

$ 35,000

Cash and cash equivalents, Jan. 1, 2015

 

20,000

Cash and cash equivalents, Dec. 31, 2015

 

$ 55,000

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