Wu Company\'s income statement for the year ended December 31, 2011, and its com

Question

Wu Company's income statement for the year ended December 31, 2011, and its comparative balance sheets as of December 31, 2011 and 2010, are presented below. During 2011, engaged in these transactions a. Sold at a gain of $7,000 furniture and fixtures that cost $35,600, on which it had accumulated depreciation of $28,800 Purchased furniture and fixtures in the amount of $39,600. c. Paid a $20,000 note payable and borrowed $40.000 on a new note. d. Converted bonds payable in the amount of $100,000 into 4,000 shares of common stock. e. Declared and paid $6,000 in cash dividends. Wu Company Income Statsmont For tha Year Ended Decomber 31, 2011 Ssles Cost of goods sold Gross margin Operating expenses fincduding depreciaticn 51. $1,609,000 481,200 49 400 $ 31,800 expense of $46,800 Income from operations Ocher income lexpenses Gsin en sale of furmiture and Faxtures 7,000 3,200)16200 Interest expense Income before income taes Income taxes expense Net income 1,000 Wu Compan Comparathve Balance Sboats Dacamber 31, 2011 and 2010 2011 2010 Assets Cosh Accounts receivable Ine? 64800 $ 50,000 165,200 200,000 350000 450,000 Merchandise inventory Prepaid rent Furniture and faxtures 2,000 14a000 144,000 Accumulated deprecistion-furniture and fiatures (42000 240009500 Total assets 5710 W 100 334 I 118 Liabatas and StotholdarsEq?ty $143,400 $200,400 1,400 4400 40000 20,000 00,000 200,000 240,000 200,000 181,440 121.440 81,7607670 000 Accounts payable Incometaxes payable Notes payable long-term) Bonds payable Common stock $20 par value Addtional psid-in capital Retained esmings Total lsbiliesand sockholders eouity000 labilities and stockhoiders equity

Explanation / Answer

Cash flow indirect method Cash flow from operating activities Net income 11000 Adjustments to reconcile the net income Depreciation expense 46800 Gain on sale of furniture -7000 Changes in current asset and liabilities decrease in prepaid rent 1000 decrease in accounts receivable 34800 decrease in Inventory 100000 decrease in accounts payable -57000 decrease in income tax payable -3000 115600 Cash flow from operating activities 126600 Cash flow from Investing activities furniture and fixture purchased -39600 Frniture and fixture sold 13800 Cash flow from Investing activities -25800 Cash flow from Financing activities Notes payable issued 40000 notes payable paid -20000 Dividend paid -6000 Cash flow from Financing activities 14000 Net Cash and cash equivalent 114800 Add Beginning cash and cash equivalent 50000 Ending cash and cash equivalent 164800

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