Exercise 6 The balance sheet data of Wheels ‘n Tires, Inc. at the end of 2014 an
ID: 2419047 • Letter: E
Question
Exercise 6 The balance sheet data of Wheels ‘n Tires, Inc. at the end of 2014 and 2013 follow.
2014 2013
Cash $ 7,500 $ 10,000
Accounts receivable (net) 82,000 87,500
Merchandise inventory 86,000 81,000
Prepaid expenses 9,000 12,000
Equipment 170,000 145,000
Accumulated depreciation—equipment (45,000) (36,000)
Land 30,000 50,000
Total assets $339,500 $349,500
Accounts payable $ 44,500 $ 58,000
Accrued expenses 11,000 9,000
Notes payable—bank, short-term –0– 50,000
Bonds payable 20,000 –0–
Common stock, $1 par 181,000 160,000
Retained earnings 83,000 72,500
Total liabilities and shareholders’ equity $339,500 $349,500
Equipment was purchased for $21,000 in exchange for common stock, par $21,000, during the year; all
other equipment purchased was for cash. Land was sold for $31,500. Cash dividends of $7,000 were
declared and paid during the year.
Instructions
Compute net cash provided (used) by:
(a) operating activities.
(b) investing activities.
(c) financing activities.
Explanation / Answer
CASH FLOW STATEMENT: Cashflows from Operating Activities: Net Income from retained earnings (83000-72500) 10500 Adjustment required for reconciling Depreciation (45000-36000) 9,000 Dividend paid 7,000 Gain on sale of Land (31500-20,000) -11500 Decrease in Accounts receivable 5500 Increase in Inventory -5000 Decrease in Prepaid expense 3,000 Decrease in Accounts payable -13,500 Decrease in Notes payable-Short term -50000 Increase in Accrued expense 2,000 Net Cash used from operating activities -43,000 Cashflows from Investing Activities: Sales of land 31500 Purchase of equipment for cash (145000+21000-170000) -4000 Net cash provided from Investing Activities 27500 Cashflows from Financing Activities Bonds issued 20,000 Dividend paid -7000 Net cash provided from Financing activities 13000 Net cash decrease during the year -2500 Beginning balance of cash 10,000 Ending balance of cash 7,500 Net Cash used in Operating activities: ($43,000) Net cash provided from Investing activities $27,500 Net cash provided from Financing Activities: $13,000