Statement of Cash Flows The following is a list of items for Witts Company\'s 20

Question

Statement of Cash Flows

The following is a list of items for Witts Company's 2016 statement of cash flows:

receipt from sale of equipment, $2,700

increase in inventory, $3,900

net income, $13,500

payment for purchase of building, $29,000

depreciation expense, $8,700

receipt from issuance of bonds, $8,000

increase in prepaid expenses, $800

loss on sale of equipment, $2,200

payment of dividends, $5,200

decrease in accounts receivable, $1,700

issuance of common stock for land, $6,900

decrease in accounts payable, $1,500

beginning cash balance, $10,200

Required:

1. Prepare the statement of cash flows. Use a minus sign to indicate cash outflows, a decrease in cash or cash payments.

2. If Witts Company uses IFRS, and chooses to show dividends as an operating activity, which of the following will result?

Witts Company would report net cash provided by operating activities of $25,100.

Witts Company would report net cash provided by operating activities of $14,700.

Witts Company would report net cash provided by financing activities of $2,800.

Witts Company would report net cash used by financing activities of $2,400.

WITTS COMPANY Statement of Cash Flows For Year Ended December 31, 2016 Operating Activities: $ Adjustment for noncash income items: Adjustments for cash flow effects
from working capital items: $ Investing Activities: $ Financing Activities: $ $ Cash, January 1, 2016 Cash, December 31, 2016 $

Explanation / Answer

1) WITTS COMPANY Statement of Cash Flows For Year Ended December 31, 2016 Operating Activities: $ $ net income                    13,500 Adjustment for noncash income items: depreciation expense                     8,700 loss on sale of equipment                     2,200 Adjustments for cash flow effects                   24,400 from working capital items: increase in inventory                    -3,900 increase in prepaid expenses                       -800 decrease in accounts receivable                      1,700 decrease in accounts payable                    -1,500                    19,900 Investing Activities: receipt from sale of equipment                     2,700 payment for purchase of building                  -29,000                  -26,300 Financing Activities: receipt from issuance of bonds                     8,000 payment of dividends                    -5,200                     2,800 Cash, January 1, 2016                    10,200 Cash, December 31, 2016              6,600 2) Witts Company would report net cash provided by operating activities of $14,700. Net cash provided by operating activities = $19900 Less: Payment of dividend = $5200 Net cash provided by operating activities after adjustment of dividend = $14700

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