Question

Condensed financial data of Windsor Company for 2017 and 2016 are presented below.WINDSOR COMPANYCOMPARATIVE BALANCE SHEETAS OF DECEMBER 31, 2017 AND 2016 2017 2016Cash $1,770 $1,170Receivables 1,790 1,320Inventory 1,610 1,940Plant assets 1,910 1,680Accumulated depreciation (1,200) (1,190 )Long-term investments (held-to-maturity) 1,300 1,420 $7,180 $6,340Accounts payable $1,210 $910Accrued liabilities 200 240Bonds payable 1,370 1,560Common stock 1,880 1,740Retained earnings 2,520 1,890 $7,180 $6,340WINDSOR COMPANYINCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2017Sales revenue $7,010Cost of goods sold 4,730Gross margin 2,280Selling and administrative expenses 930Income from operations 1,350Other revenues and gains Gain on sale of investments 80Income before tax 1,430Income tax expense 540Net income 890Cash dividends 260Income retained in business $630Additional information:During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017.Prepare a statement of cash flows using the indirect method.

Answer 1

Answer and Explanation:

The preparation of the cash flow statement is presented below

Windsor Company

Statement of cash flow  

Cash flows from operating activities  

Net Income $890

Adjustments made

Add: Depreciation expenses ($1,200 - $1,190) $10  

Less: Gain on sale of investment -$80  

Less: Increase in receivable -$470  

Add: Decrease in Inventories $330  

Add: Increase in Accounts Payable $300  

Less: Decrease in Accrued Liabilities -$40  

Net cash from operating activities $940

Cash flows from investing activities  

Sale of long term investment (($1,420 - $1,300) + $80) $200  

less: Purchase of Plant Assets ($1,910 - ($1,680 + $70)) -$160

Net cash used investing activities $40

Cash flows from financing activities  

Repayment of Bonds Payable -$190  

Add: Issue of Common stock ($1,880 - ($1,740 + $70)) 70  

Less: Payment of Dividends -$260

Net cash from financing activities -$380.00

Net Increase in cash and cash equivalents $600

Add: Beginning cash balance $1,170.00

Ending Cash Balance $1,770

Non cash activities  

Issue of common stock of $70 for acquisition of Plant