PRACTICE PROBLEM 2 Below are the comparative balance sheets for 2014 and 2013 an

Question

PRACTICE PROBLEM 2 Below are the comparative balance sheets for 2014 and 2013 and the income statement for 2014 for The Wrong Company. The Wrong Company Balance Sheets As at December 31, 2014 and 2013 2014 2013 Assets Cash Accounts receivable Short-term investments Inventory Land Buildings and equipment $30 75 15 70 60 400 115) (75) $715 $575 $42 73 40 75 50 550 Less: Accumulated depreciation Liabilities and Stockholders' Equity Accounts payable Salaries payable Interest payable Income tax payable Notes payable Bonds payable Common stock Retained earnings $ 28 $ 35 160 376 135 $715 12 30 100 300 90 $575

Explanation / Answer

Indirect Method The Wrong Company CASH FLOW STATEMENT FOR THE YEAR ENDED DEC 31, 2014 $ $ CASH FLOW FROM OPERATING ACTIVITIES Net Income                       80.00 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation                     40.00 Loss on sale of land                       3.00 Decrease in Accounts Receivable                       2.00 Increase in Short term investment                  (25.00) Increase in inventory                    (5.00) Decrease in Accounts Payable                    (7.00) Decrease in Salaries payable                    (3.00) Increase in Interest payable                       2.00 Decrease in Income tax payable                    (3.00)                         4.00 Net Cash provided by Operating Activities                     84.00 CASH FLOW FROM INVESTING ACTIVITIES Cash Received from sale of land                       7.00 Cash Payments to Purchase Building & Equipment               (150.00) Net Cash Used in Investing Activities               (143.00) CASH FLOW FROM FINANCING ACTIVITIES Cash Receipts from issuing of Common Stock                     76.00 Cash Receipts from issuing of bonds                     60.00 Cash payments to Notes payable (long - term)                  (30.00) Dividend Paid                  (35.00) Net Cash provided by Financing Activities                     71.00 Net Increase in Cash during the year                     12.00 Cash Balance, January 1                     30.00 Cash Balance, December 31                     42.00 Direct Method The Wrong Company CASH FLOW STATEMENT FOR THE YEAR ENDED DEC 31, 2014 $ $ CASH FLOW FROM OPERATING ACTIVITIES Cash receipt from customer                  382.00 Cash payment to suppliers               (142.00) Cash payment for Salary                  (48.00) Cash payment for interest expenses                  (10.00) Cash payment for income tax expenses                  (73.00) Cash payment for short term investment                  (25.00) Net Cash provided by Operating Activities                     84.00

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