Chapter 14: Q14-6SE (page 772)

Question: Computing cash flows from investing and financing activities Use the data in Short Exercise S14-5 to complete this exercise. Prepare Winding Road Cellular’s statement of cash flows using the indirect method for the year ended April 30, 2018. Assume beginning and ending Cash are $48,000 and $52,200, respectively.

Expert verified

Answer

Net Increase/(Decrease) in cash is $4,200.

Step by step solution

Cash flows from operating activities
Net Income		$55,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$2,000
Increase in current assets other than cash	($27,000)
Decrease in current liabilities	($20,000)
Net cash provided by operating activities		$10,000

Winding Road Cellular Statement of cash flows Year ended 31st December, 2018
Cash flows from operating activities
Net Income		$55,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$2,000
Increase in current assets other than cash	($27,000)
Decrease in current liabilities	($20,000)
Net cash provided by operating activities		$10,000

Cash flows from investing activities
Cash receipt from sale of land	$27,000
Cash purchase of equipment	($44,000)
Net cash used for investing activities		($17,000)

Cash flows from financing activities
Cash receipt from issuance of common stock	$17,000
Cash payment of dividends	($5,800)
Net cash provided by financing activities		$11,200
Net Increase/(Decrease) in cash		$4,200
Cash balance, December 31, 2017		$48,000
Cash balance, December 31, 2018		$52,200