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

Question

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The staterments are complete except for the statement of cash fows. 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 Less: Accumulated depreciation $ 91,500 $111,000 120,000 105,000 0,000 97,500 170,000 90,000 (48,800) (25,000) Total assets $422,700 $378,500 Liabilities: Accounts payable Salaries and Wages Payable Notes payable, long-term Stockholders' Equity Common stock Retained earnings S 15,000 S 18,000 75,00090,000 140,000 120,000 3,000 189,700 149,000 Total liabilities and stockholders' equity $422.700 $378,500 Income Statement Cost of goods sold Depreciation expense Other expenses $400,000 210,000 23,800 100,000 Net income $ 66,200 Other information from the company's records includes the following: a. Bought equipment for cash, $80,000. b.Paid $15,000 on long-term note payable c. Issued new shares of common stock for $20,000 cash. d.Cash dividends of $25,500 were declared and paid to stockholders. e.Accounts Payable arose from inventory purchases on credit f. Income tax expense ($16,550) and interest expense ($4,500) were paid in full at the end of both years and are included in Other Expenses Required a. Prepare the statement of cash flows using the indirect method. Include any supplemental disclosures Enter any deductions and cash outflows as a negative value.)

Explanation / Answer

Wickersham Brothers Inc. Cash Flow Statement For the year ended December 31 Cash flows from operating activities Net Income $   66,200 Adjustment to reconcile net income to: Depreciation expense $   23,800 Increase in accounts receivable $ (15,000) Decrease in inventory $      7,500 Decrease in accounts payable $   (3,000) Increase in salaries and wages payable $      1,500 Total adjustments $   14,800 Net cash provided by operating activities $   81,000 Cash flows from investing activities Purchase of equipment $ (80,000) Net cash used by investing activities $ (80,000) Cash flows from financing activities Proceeds from issue of stock   $   20,000 Repayment of long term note $ (15,000) Dividend paid $ (25,500) Net cash used by financing activities $ (20,500) Net increase in cash and cash equivalents $ (19,500) Cash and cash equivalents at beginning of period $ 111,000 Cash and cash equivalents at end of period $   91,500

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