Cash Flows P17-9C Condensed financial data of Wanwright Company are shown below.

Question

Cash Flows P17-9C Condensed financial data of Wanwright Company are shown below. WANWRIGHT COMPANY Comparative Balance Sheets December 31 Assets 2014 2013 Cash $ 92,700 $ 33,400 Accounts receivable 70,800 37,000 Inventory 131,900 102,650 Investments 84,500 107,000 Plant assets 310,000 205,000 Accumulated depreciation (49,500) (40,000) Total $640,400 $445,050 Liabilities and Stockholders’ Equity Accounts payable $ 62,700 $ 48,280 Accrued expenses payable 15,100 18,830 Bonds payable 140,000 70,000 Common stock 250,000 200,000 Retained earnings 172,600 107,940 Total $640,400 $445,050 WANWRIGHT COMPANY Income Statement For the Year Ended December 31, 2014 Sales revenue $297,500 Gain on sale of plant assets 5,000 302,500 Less: Cost of goods sold $119,460 Operating expenses, excluding depreciation expense 14,670 Depreciation expense 35,500 Income taxes 27,270 Interest expense 2,940 199,840 Net income $102,660 Additional information: 1. New plant assets costing $141,000 were purchased for cash during the year. 2. Investments were sold at cost. 3. Plant assets costing $36,000 were sold for $15,000, resulting in a gain of $5,000. 4. A cash dividend of $38,000 was declared and paid during the year. Instructions Prepare a statement of cash flows using the indirect method.

Explanation / Answer

Warnwright Company All Amounts in $ Cash Flow Statement for the year ended 31 December 2014 Cash Flows from Operating Activities Net Income per Income Statement 102660 Less : Gain on Sale of Plant Assets -5000 Add : Depreciation Expense 35500 Add : Income Taxes 27270 Add : Interest Expense 2940 60710 Cash Flows before Working Capital Changes 163370 Less : Increase in Accounts Receivable -33800 Less : Increase in Inventory -29250 Add : Increase in Accounts Payable 14420 Add : Decrease in Accrued Expenses -3730 -52360 Cash Inflows from Operating Activities 111010 Cash Flows from Investing Activities Sale of Investments 22500 Purchase of Plant Assets -141000 Sale of Plant Assets 15000 -103500 Cash Flows from Financing Activities Issue of Bonds Payable 70000 Issue of Common Stock 50000 Income Taxes Paid -27270 Interest expenses paid -2940 Dividends declared and paid -38000 51790 Net Cash Inflows during the year 59300 Opening Cash/Cash Equivalents 33400 Closing Cash/Cash Equivalents 92700

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