The comparative balance sheets for 2016 and 2015 and the statement of income for
ID: 2483848 • Letter: T
Question
The comparative balance sheets for 2016 and 2015 and the statement of income for 2016 are given below for Wright Company. Additional information from Wright's accounting records is provided also.
The common stock of Microsoft Corporation was purchased for $27,000 as a short-term investment not classified as a cash equivalent.
Prepare the statement of cash flows of Wright Company for the year ended December 31, 2016. Present cash flows from operating activities by the direct method.
WRIGHT COMPANYComparative Balance Sheets
December 31, 2016 and 2015
($ in 000s) 2016 2015 Assets Cash $ 102 $ 65 Accounts receivable 106 110 Short-term investment 49 22 Inventory 109 105 Land 78 95 Buildings and equipment 600 470 Less: Accumulated depreciation (157) (110) $ 887 $ 757 Liabilities Accounts payable $ 36 $ 42 Salaries payable 4 7 Interest payable 8 5 Income tax payable 5 10 Notes payable 0 26 Bonds payable 222 170 Shareholders' Equity Common stock 340 270 Paid-in capital—excess of par 155 135 Retained earnings 117 92 $ 887 $ 757
Explanation / Answer
Wright Company Cashflow statement for the year ended 31-12-2016 Cashflows from operating activities (Direct Method) Calculation $ in 000s Cash receipts from customers (110 + 450 -106) $ 454.00 Cash Paid to suppliers ( 42 + 204 -36) - W N 1 $ -210.00 Operating Expenses paid as per W N 2 $ -133.00 Net cash from operating activities $ 111.00 Cashflows from Investing activities Sale of land $ 12.00 Purchase of equipment $ -130.00 Purchase of short term investment $ -27.00 Net cash used in investing activities $ -145.00 Cashflows from Financing Activities Proceeds from issue of common stock $ 70.00 Excess of issue price over par $ 20.00 Dividends Paid $ -45.00 Proceeds from issue of Bonds $ 52.00 Redumption of notes payable $ -26.00 Net Cash from Financing Activities $ 71.00 Net Decrease in Cash and Cash equivalents $ 37.00 Cash and Cash equivalents at the beginning of the period $ 65.00 Cash and Cash equivalents at the end of the period $ 102.00 working Note 1 (W N1) for Purchases Purchases Closing inventory 109 Cost of Goods sold 200 Less opening 105 Purchases 204 Working Note 2 ( WN 2) operating expenses Opening Salaries Payable 7 Interest Payable 5 Income tax payable 10 22 Add: Incurred during the year Salaries expense 50 Interest expense 16 Income tax expense 62 128 Less: ending payables Salaries Payable 4 Interest Payable 8 Income tax payable 5 17 Paid during the year 133