Question

Statement of Cash Flows

The following is a list of the items to be included in the preparation of Warrick Company’s 2016 statement of cash flows:

1. Net income, $41,600
2. Payment for purchase of building, $90,000
3. Increase in accounts receivable, $7,200
4. Proceeds from issuance of common stock, $37,000
5. Increase in accounts payable, $5,000
6. Proceeds from sale of land, $8,400
7. Depreciation expense, $20,000
8. Payment of dividends, $38,000
9. Gain on sale of land, $3,000
10. Decrease in inventory, $3,300
11. Payment for purchase of long-term investments, $8,600
12. Amortization of discount on bonds payable, $1,600
13. Proceeds from issuance of note, $19,000
14. Increase in deferred taxes payable, $5,900
15. Equipment acquired by capital lease, $19,400
16. Decrease in salaries payable, $2,700
17. Beginning cash balance, $27,200

Required

1. Prepare the statement of cash flows.

WARRICK COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:
	$
Adjustment for noncash income items:
Adjustments for cash flow effects from working capital items:
Net cash provided by operating activities		$
Investing Activities:
	$
Net cash used for investing activities
Financing Activities:
	$
Net cash provided by financing activities
		$
		$
Investing and Financing Activities Not Affecting Cash
Investing Activities:
		$
Financing Activities:

2. Assume the company's preferred stock has been selling for $110 per share during 2016. How many shares would the company have had to issue to avoid having a decrease in cash during the year?

shares

Answer 1

1.

WARRICK COMPANY
Statement of Cash Flows
For Year Ended December 31,2016
Operating Activities:
Net Profit	41600
Adjustment for non cash income items:
Depreciation expense	20000
Gain on sale of land	-3000
Amortization of discount on bonds payable	1600
Increase in deferred taxes payable	5900
Decrease in salaries payable	2700
Adjustments for cash flow effects from working capital items:
Increase in accounts receivable	-7200
Increase in accounts payable	5000
Decrease in inventory	3300
Net cash provided by operating activities		69900
Investing Activities:
Puchase of buiding	-90000
Proceeds from sale of land	8400
Purchase of long-term investment	-8600
Net cash used for investing activities		-90200
Financing Activities:
Proceeds from issue of common stock	37000
Payment of dividend	-38000
Proceeds from issuance of note	19000
Net cash provided by financing activities		18000
Beginning cash and cash equivalents		27200
Net decrease in cash and cash equivalents		-2300
Ending cash and cash equivalents		24900
Investing and Financing Activities not affecting cash
Investing Activities:
Equipment acquired by capital lease	19400
Financing Activities:

2. Net decrease in cash -$2300, Preferred stock to be issued = $2300/110 = 21 shares.