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Chapter 23: Q2BE (page 1373)

Wainwright Corporation had the following activities in 2017:

1. Sale of land \(180,000.

4. Purchase of equipment \)415,000.

2. Purchase of inventory \(845,000.

5. Issuance of common stock \)320,000.

3. Purchase of treasury stock \(72,000.

6. Purchase of available-for-sale debt securities \)59,000.

Compute the amount Wainwright should report as net cash provided (used) by investing activities in its 2017 statement of cash flows.

Short Answer

Expert verified

The business entity used$294,000 in the investing activities.

Step by step solution

01

Definition of Investing Activities

All those activities that involve cash movement due to the purchase and sale of the fixed assets of the business entity are known as investing activities. The sale of a fixed asset is added and the purchase of fixed assets is deducted.

02

Investing activity section

Particular

Amount $

Sale of land

$180,000

Purchase of equipment

($415,000)

Purchase of available for sale securities

($59,000)

Cash used in investing activities

($294,000)

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Most popular questions from this chapter

Question: (L01,4) (Classification of Transactions) Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

2017

2016

Increase (Decrease)

Selected balance sheet accounts

Assets

Accounts receivables

\(34,000

\)24,000

\(10,000

Property, plant and equipment

277,000

247,000

30,000

Accumulated depreciation – plant assets

(178,000)

(167,000)

(11,000)

Liabilities and stockholder’s equity

Bonds payable

\)49,000

\(46,000

\)3,000

Dividend payable

8,000

5,000

3,000

Common stock, \(1 par

22,000

19,000

3,000

Additional paid-in-capital

9,000

3,000

6,000

Retained earnings

104,000

91,000

13,000

Selected income statement information for the year ended December 31, 2017:

Sales revenue

\)155,000

Depreciation

33,000

Gain on sale of equipment

14,500

Net income

31,000

Additional information:

1. During 2017, equipment costing \(45,000 was sold for cash.

2. Accounts receivable relate to sales of merchandise.

3. During 2017, \)20,000 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.

Instructions

Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

(a) Payments for purchase of property, plant, and equipment.

(b) Proceeds from the sale of equipment.

(c) Cash dividends paid.

(d) Redemption of bonds payable.

Comparative balance sheet accounts of Sharpe Company are presented below.

SHARPE COMPANY

COMPARATIVE BALANCE SHEET ACCOUNTS

AS OF DECEMBER 31

Debit Balances 2017 2016

Cash \( 70,000 \) 51,000

Accounts Receivable 155,000 130,000

Inventory 75,000 61,000

Debt investments (available-for-sale) 55,000 85,000

Equipment 70,000 48,000

Buildings 145,000 145,000

Land 40,000 25,000

Totals \(610,000 \)545,000

Credit Balances

Allowance for Doubtful Accounts \( 10,000 \) 8,000

Accumulated Depreciation—Equipment 21,000 14,000

Accumulated Depreciation—Buildings 37,000 28,000

Accounts Payable 66,000 60,000

Income Taxes Payable 12,000 10,000

Long-Term Notes Payable 62,000 70,000

Common Stock 310,000 260,000

Retained Earnings 92,000 95,000

Totals \(610,000 \)545,000

Additional data:

1. Equipment that cost \(10,000 and was 60% depreciated was sold in 2017.

2. Cash dividends were declared and paid during the year.

3. Common stock was issued in exchange for land.

4. Debt investments that cost \)35,000 were sold during the year.

5. There were no write-offs of uncollectible accounts during the year.

Sharpe’s 2017 income statement is as follows.

Sales revenue \(950,000

Less: Cost of goods sold 600,000

Gross profit 350,000

Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000

Income from operations 100,000

Other revenues and expenses Gain on sale of investments \)15,000

Loss on sale of equipment (3,000) 12,000

Income before taxes 112,000

Income taxes 45,000

Net income $ 67,000

Instructions

(a) Compute net cash provided by operating activities under the direct method.

(b) Prepare a statement of cash flows using the indirect method.

Question: What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?

Question: Each of the following items must be considered in preparing a statement of cash flows for Blackwell Inc. for the year ended December 31, 2017. State where each item is to be shown in the statement, if at all.

  1. Plant assets that had cost \(18,000 6½ years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for \)4,000.
  2. During the year, 10,000 shares of common stock with a stated value of \(20 a share were issued for \)41 a share.
  3. Uncollectible accounts receivable in the amount of \(22,000 were written off against Allowance for Doubtful Accounts.
  4. The company sustained a net loss for the year of \)50,000. Depreciation amounted to \(22,000, and a gain of \)9,000 was realized on the sale of available-for-sale securities for $38,000 cash.

Question: Collinsworth Co. reported sales on an accrual basis of \(100,000. If accounts receivable increased \)30,000 and the allowance for doubtful accounts increased \(9,000 after a write-off of \)2,000, compute cash sales.
See all solutions

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