Statement of Cash Flows-Indirect Method The comparative balance sheet of Wedge I
ID: 2489786 • Letter: S
Question
Statement of Cash Flows-Indirect Method The comparative balance sheet of Wedge Industries Inc. for December 31, 2014 and 2013, is as follows: Dec. 31, 2014 Dec. 31,2013 Assets 392 224 140 320 180 $128 160 Inventories . 360 140 24) $852 Equipment $1,208 Liabilities and Stockholders' Equity 140 24 80 200 $128 40 100 584 $852 Paid-in capital: Excess of issue price over par-common stock. Total $1,208 The following addtional information is taken from the records: 1, Land was sold for $100 2. Equipment was acquired for cash. 3. There were no disposals of equipment during the year. 4. The common stock was issued for cash. 5. There was a $260 credit to Retained Earnings for net income 6. There was an $80 debit to Retained Earnings for cash dividends declared Hide a. Prepare a statement of cash flows, using the indirect method of presenting Cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if requiredExplanation / Answer
Answer:
Explanation:
1) Change is calculated by subtracting beginning balance from ending balance.
2) Sale of common stock is calculated as:
Increase in common stock .................................40
ADD: increase in paid -in capital ....................... 100
Sale of common stock ...................................... 140
3) Cash Dividend paid is calculated as:
Dividend declared ............................................ 80
Less: increase in dividend payable .................. (24)
Cash dividend paid ........................................... 56
4) Gain on sale of land is calculated as:
Decrease in land = 40
It means land worth $40 has been sold for $100.
Therefore, gain on sale of land is $60 ($100 sale value - $40 book value).
Wedge Inc. Statement of Cash Flows Year Ended December 31, 2014 Cash flows from operating activities: Net income 260 Adjustment to reconcile net income t net cash flow from operating activities: Add: Depreciation 24 Less: Gain on sale of land 60 Changes in current operating assets and liabilities: Less: increase in accounts receivables 64 Less: increase in inventories 52 Add: increase in accounts payable 12 Net cash flow from operating activities 120 120 Cash flow from investing activities: Cash received from sale of land 100 Less: cash paid for purchase of equipment 40 Net cash flow from investing activities 60 60 Cash flow from financing activities: Cash received from sale of common stock 140 Less: cash paid for dividends 56 Net cash flow from financing activities 84 84 Cash flow from all activities 264 Add: beginning cash balance 128 Ending cash balance 392Related Questions
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