50.1K

Verified Solution

Link Copied!

Preparing a statement of cash flows using the indirect method - problem

Wolff Companys income statement and comparative balance sheet information follow. Net income $73,920

Depreciation expense $22.440

Balance Sheets
	Dec. 31 Year 2	Dec. 31 Year 1	Change
Assets
Cash	$14,520	$6,600	$7,920
Accounts receivable	54,120	42,240	$11,880
Inventory	118,800	79,200	$39,600
Prepaid insurance	6,600	9,240	($2,640)
Plant assets	330,000	257,400	$72,600
Accumulated depreciation	-89,760	-67,320	($22,440)
Total assets	$434,280	$327,360	$106,920
Liabilities and Stockholders' Equity
Accounts payable	$9,240	$13,200	($3,960)
Wages payable	11,880	7,920	$3,960
Income tax payable	9,240	10,560	($1,320)
Bonds payable	171,600	99,000	$72,600
Common stock	118,800	118,800	$0
Retained earnings	113,520	77,880	$35,640
Total liabilities and equity	$434,280	$327,360	$106,920

Cash dividends of $38,280 were declared and paid during Year 2. Also in Year 2, plant assets were purchased for cash, and bonds payable were issued for cash. Bond interest is paid semiannually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required: Using the indirect method for preparing a statement of cash flows for Year 2, compute and include your answers in the space below (e.g. 1. Operating cash flows = $). Be sure and indicate if the cash flows are inflows or outflows with parenthesis for outflows. You can use Excel.

Cash flows from Operating Activities

Cash flows from Investing Activities

Cash flows from Financing Activities

Net change in cash from Year 1 to Year 2

Answer & Explanation Solved by verified expert

See Answer