8. The management team of Wickersham Brothers Inc. is preparing its annual finan

Question

8. The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized Current Year Prior Year Balance Sheet Assets Cash Accounts receivable Merchandise inventory Property and equipment $ 112,500 $130,500 140,000 122,500 105,000 113.750 200,000 105,000 (58,000) (30,000) Total assets $499,500 $441.750 Liablities Accounts payable Salaries and Wages Payable Notes payable, long-term S 17,500 21.000 87.500 105,000 160,000 140.000 3,500 Stockholders Equity Common stock Retained earnings 231,000174,000 Total liabilities and stockholders equity $499.500 $441.750 Income Statement $500.000 Cost of goods sold Depreciation expense Other expenses 125.000 Net income s 87.000 Other information from the comgany's records includes the following a Bought equipmen: or cash. S 5.000 o Paid $17.500 on long-term note cayable c. Issued new shares of commmon srock for $20.000 cash s Cash dividends of $30 000 were deciared and paid to stockhoiders e Accounts Payable arose from inventory purchases on credit f. Income tax expense (521.750 and interest expense 55 25Ci were paid in full at the end of both years and are ncluded in Other Excenses Required a care he satemant of cash ewa us ng tre rg rect matrod inc ude any supclamental disclosures Enter any deductions and cash outtlows as a negative value.) WICKER SHAM BROTHERS Inc. Statement of Cash Flows For the Year Ended December 31

Explanation / Answer

Cash flow indirect method Cash flow from operating activities Net income 87000 Adjustments to reconcile the net income Depreciation expense 28000 Changes in current asset and liabilities Increase in accounts receivable -17500 decrease in Inventory 8750 decrease in accounts payable -3500 Increase in salaries and wages payable 1750 17500 Cash flow from operating activities 104500 Cash flow from Investing activities Equipment purchased -95000 Cash flow from Investing activities -95000 Cash flow from Financing activities Paid in capital in excess Common stock 20000 Dividend -30000 Long term notes payable -17500 Cash flow from Financing activities -27500 Net Cash and cash equivalent -18000 Add Beginning cash and cash equivalent 130500 Ending cash and cash equivalent 112500

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