Wildhorse Inc., a greeting card company, had the following statements prepared a
ID: 2394622 • Letter: W
Question
Wildhorse Inc., a greeting card company, had the following statements prepared as of December 31, 2017.
WILDHORSE INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2017 AND 2016
12/31/17
12/31/16
$5,900
$6,900
61,400
51,200
34,700
18,000
40,200
59,700
5,000
4,100
152,700
130,200
(35,400
(25,000
45,700
49,900
$310,200
$295,000
$46,300
$40,400
3,900
6,000
8,100
3,900
8,100
10,100
60,200
69,400
100,000
100,000
30,000
30,000
53,600
35,200
$310,200
$295,000
WILDHORSE INC.
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2017
$335,075
175,200
159,875
120,100
39,775
$11,400
2,000
9,400
30,375
6,075
$24,300
Additional information:
Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
WILDHORSE INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2017 AND 2016
12/31/17
12/31/16
Cash$5,900
$6,900
Accounts receivable61,400
51,200
Short-term debt investments (available-for-sale)34,700
18,000
Inventory40,200
59,700
Prepaid rent5,000
4,100
Equipment152,700
130,200
Accumulated depreciation—equipment(35,400
)(25,000
) Copyrights45,700
49,900
Total assets$310,200
$295,000
Accounts payable$46,300
$40,400
Income taxes payable3,900
6,000
Salaries and wages payable8,100
3,900
Short-term loans payable8,100
10,100
Long-term loans payable60,200
69,400
Common stock, $10 par100,000
100,000
Contributed capital, common stock30,000
30,000
Retained earnings53,600
35,200
Total liabilities & stockholders’ equity$310,200
$295,000
Explanation / Answer
Solution:
Wildhorse Inc. Statement of Cash Flows (Indirect Method) For year ended December 31, 2017 Particulars Details Amount Cash Flow from Operating Activities: Net Income $24,300.00 Adjustments to reconcile net income to net cash flow from operating activitiess: Gain on sale of equipment -$2,000.00 Depreciation ($35,400 - $25,000 + $20,100*70%) $24,470.00 Amortization of copyrights ($49,900 - $45,700) $4,200.00Changes in current operating assets and liabilities: Increase in accounts receivables ($61,400 - $51,200) -$10,200.00 Decrease in inventories ($59,700 - $40,200) $19,500.00 Increase in prepaid rent ($5,000 - $4,100) -$900.00 Increase in accounts payable ($46,300 - $40,400) $5,900.00 Decrease in income tax payable ($6,000 - $3,900) -$2,100.00 Increase in salary and wages payable ($8,100 - $3,900) $4,200.00 Decrease in short term loans payable ($10,100 - $8,100) -$2,000.00 Net cash flow from operating activities $65,370.00 Cash Flow from Investing Activities: Cash received from sale of Equipment ($20,100*30% + $2,000) $8,030.00 Cash paid for purchase of Investment ($34,700 - $18,000) -$16,700.00 Cash paid for purchase of equipment ($152,700 - $130,200 + $20,100) -$42,600.00 Net cash flow used for investing activities -$51,270.00 Cash Flow from Financing Activities: Payment of long term loan ($69,400 - $60,200) -$9,200.00 Cash paid for dividends -$5,900.00 Net cash flow from financing activities -$15,100.00 Net Increase / (Decrease) in Cash -$1,000.00 Cash balance at beginning of year $6,900.00 Cash balance at end of year $5,900.00
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