BG Wholesalers is developing its annual financial statements at December 31, 201
ID: 2501481 • Letter: B
Question
BG Wholesalers is developing its annual financial statements at December 31, 2016. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.
Prepare the statement of cash flows for the year ended December 31, 2016, using the indirect method.(List cash outflows as negative amounts.)
BG WHOLESALERSStatement of Cash FlowsFor the Year Ended December 31, 2016Cash flows from operating activities:Net income$10,800Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense6,800Increase in accounts receivableIncrease in merchandise inventoryIncrease in accounts payableDecrease in accrued expenses6,800Net cash provided by operating activities17,600Cash flows from investing activities:Cash payments to purchase fixed assets20,800Net cash used in investing activities20,800Cash flows from financing activities:Cash payments on long-term noteCash receipts from issuing stockNet cash provided by financing activities0Net increase in cash during the yearCash balance, January 1, 2016Cash balance, December 31, 2016$0
BG Wholesalers is developing its annual financial statements at December 31, 2016. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
Explanation / Answer
NET INCOME =$10800
ADD-DEPRICIATION (AS NON CASH ITEM) =$6800
LESS- INCREASE IN ACCOUNTS RECEVABLE =($4200)
LESS- INCREASE IN MERCENDASIE INVENTORY =($6000)
ADD- INCREASE IN ACCOUNTS PAYBLE =$8700
LESS- DECEREASE IN ACCURED WAGES =($600)
NET CASH FLOW FROM OPERATING ACTIVITY =$15500
CASH FLOW FROM INVESTING ACTIVITY
PAYMENT FOR PURCHASE OF FIXED ASSET =($23000)
NET CASH USED IN INVESTING ACTIVITY =($23000)
CASH FLOW FROM FINANCING ACTIVITY
CASH PAID FOR LONG TERM NOTE PAYBLE =($4200)
CASH RECEIVED FROM ISSUE OF NEW SHARE =$19300
NET CASH RECEIVED FROM FINANCEING ACTIVITY =$15100
NET INCREASE IN CASH FLOW DURING THE YEAR =$7600
OPENING BALANCE OF CASH =$31400
CLOSEING BALANCE OF CASH =$39000
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