Question

Exercise 118 The information shown below is taken from the accounts of Waverly Corporation for the year ended December 31, 2017. Net income $314,000 Amortization of patent 12,000 Proceeds from issuance of common stock 103,000 Decrease in inventory 27,000 Sale of building at a $15,000 gain 85,000 Decrease in accounts payable 15,000 Purchase of equipment 185,000 Payment of cash dividends 24,000 Depreciation expense 55,000 Decrease in accounts receivable 23,000 Payment of mortgage 75,000 Increase in short-term notes payable 8,000 Sale of land at a $5,000 loss 40,000 Purchase of delivery van 33,000 Cash at beginning of year 205,000 Prepare a statement of cash flows for Waverly Corporation for the year ended December 31, 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Answer:

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $314,000

Adjustment made:

Add : Depreciation expense $55,000

Add:  Amortization of patent $12,000

Less: Gain on sale of building -$15,000

Add: Loss on sale of land $5,000

Add: Decrease in accounts receivable $23,000

Add: Increase in short-term notes payable $8,000

Add: Decrease in inventory $27,000

Less: Decrease in accounts payable -15,000

Total of Adjustments $100,000

Net Cash flow from Operating activities              $414,000

Cash flow from Investing activities  

Sale of building $85,000

Less: Purchase of equipment -$185,000

Sale of land $40,000

Less: Purchase of delivery van -$33,000

Net Cash flow from Investing activities -$93,000

Cash flow from Financing activities  

Proceeds from issuance of common stock $103,000

Less: Payment of cash dividends -$24,000

Less: Payment of mortgage -$75,000

Net Cash flow from Financing activities $4,000

Net Cash flow from Operating activities $414,000

Net Cash flow from Investing activities -$93,000

Net Cash flow from Financing activities $4,000

Net increase (decrease) in cash for the year is $325,000

Add: Cash at beginning of year $205,000

Ending cash balance $530,000