11. (30%) Use the following financial statements and additional information pert

Question

11. (30%) Use the following financial statements and additional information pertain to wescott Company. Wescott Company Statements of Financial Position December 31 2015 2014 Assets Merchandise inventory... Prepaid expense. Equipment. Accumulated depreciation-Equipment 85,600 $65,200 72,850 56,750 157,750 144,80 12,680 280,600 245,600 (80,600)(97,600) $522,280 $427,480 6,080 Total assets.. ???? Attention: 1. For fairness and justice, students should be self-disciplined to maiatain school's and students' honor 2. Chatting, taking examination papers out, peeping, and other misconduct are prohibi P.3 ATRX-003-001-FM256-0 examination. Violators will be seriously punished.

Explanation / Answer

Part 1)

The cash flow statement with the use of direct method is prepared as follows:

_____

Part 2)

The highest cash inflow of $109,700 is provided by the operating activity.

Yes, it is adequate for the company to has its cash flow from this activity. It is because the operating activity cash flows indicate the amount of cash actually generated from the core business of the company and not any other incidential activity carried out by the company.

Wescott Company Statement of Cash Flows For the Year Ended December 31, 2015 Cash Flow from Operating Activities Cash Collection from Customers (56,750+488,000-72,850) 471,900 Less: Cash Paid for Merchandise (212,540-144,850+157,750+45,450-52,850) 218,040 Cash Paid for Operating Expenses (106,260-12,680+6,080) 99,660 Cash Paid for Interest 6,400 Cash Paid for Income Taxes (41,100-15,240+12,240) 38,100 362,200 Net Cash Provided by Operating Activities (A) 109,700 Cash Flow from Investing Activities Cash Paid for Purchase of Equipment -120,000 Cash Received from Sale of Equipment (85,000-60,000 + 4,700) 29,700 Net Cash Used by Operating Activities (B) -90,300 Cash Flow from Financing Activities Retirement of Notes Payable -20,000 Proceeds from Issuance of Common Stock (200,000-150,000+53,000-40,000) 63,000 Cash Paid for Dividends (100,590+83,400-141,990) -42,000 Net Cash Used by Financing Activities (C) 1,000 Net Increase/Decrease in Cash (A+B+C) $20,400 Add Opening Cash Balance $65,200 Closing Cash Balance (same as provided in the question) $85,600

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