The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright’s accounting records is provided also. WRIGHT COMPANY
The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright’s accounting records is provided also. WRIGHT COMPANY
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter11: The Statement Of Cash Flows
Section: Chapter Questions
Problem 55PSA
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Question
The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright’s accounting records is provided also.
WRIGHT COMPANY | ||||||||
Comparative Balance Sheets | ||||||||
December 31, 2021 and 2020 | ||||||||
($ in thousands) | ||||||||
2021 | 2020 | |||||||
Assets | ||||||||
Cash | $ | 42 | $ | 30 | ||||
73 | 75 | |||||||
Short-term investment | 40 | 15 | ||||||
Inventory | 75 | 70 | ||||||
Land | 50 | 60 | ||||||
Buildings and equipment | 550 | 400 | ||||||
Less: |
(115 | ) | (75 | ) | ||||
$ | 715 | 575 | ||||||
Liabilities | ||||||||
Accounts payable | $ | 28 | $ | 35 | ||||
Salaries payable | 2 | 5 | ||||||
Interest payable | 5 | 3 | ||||||
Income tax payable | 9 | 12 | ||||||
Notes payable | 0 | 30 | ||||||
Bonds payable | 160 | 100 | ||||||
Shareholders’ Equity | ||||||||
Common stock | 250 | 200 | ||||||
Paid-in capital—excess of par | 126 | 100 | ||||||
135 | 90 | |||||||
$ | 715 | $ | 575 | |||||
WRIGHT COMPANY | ||||||
Income Statement | ||||||
For Year Ended December 31, 2021 | ||||||
($ in thousands) | ||||||
Revenues: | ||||||
Sales revenue | $ | 380 | ||||
Expenses: | ||||||
Cost of goods sold | $ | 130 | ||||
Salaries expense | 45 | |||||
Depreciation expense | 40 | |||||
Interest expense | 12 | |||||
Loss on sale of land | 3 | |||||
Income tax expense | 70 | 300 | ||||
Net income | $ | 80 | ||||
Additional information from the accounting records:
- Land that originally cost $10,000 was sold for $7,000.
- The common stock of Microsoft Corporation was purchased for $25,000 as a short-term investment not classified as a cash equivalent.
- New equipment was purchased for $150,000 cash.
- A $30,000 note was paid at maturity on January 1.
- On January 1, 2021, bonds were sold at their $60,000 face value.
- Common stock ($50,000 par) was sold for $76,000.
- Net income was $80,000 and cash dividends of $35,000 were paid to shareholders.
Required:
Prepare the statement of cash flows of Wright Company for the year ended December 31, 2021. Present cash flows from operating activities by the direct method.
Expert Solution
Step 1
Cash flow statement shows the cash inflow and cash outflow of the company that represents the cash transactions due to the operating, investing, and financing activities.
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