Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281



Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem

Statement of Cash Flows The following is a list of the items to be included in the preparation of Warrick Company’s 2019 statement of cash flows:

  1. a. net income, $59,200
  2. b. payment for purchase of building, $98,000
  3. c. increase in accounts receivable, $7,400
  4. d. proceeds from issuance of common stock, $37,100
  5. e. increase in accounts payable, $4,500
  6. f. proceeds from sale of land, $7,000
  7. g. depreciation expense, $12,600
  8. h. payment of dividends, $36,000
  9. i. gain on sale of land, $5,300
  10. j. decrease in inventory, $3,700
  11. k. payment for purchase of long-term investments, $9,600
  12. l. amortization of discount on bonds payable, $1,900
  13. m. proceeds from issuance of note, $18,000
  14. n. increase in deferred taxes payable, $5,000
  15. o. equipment acquired by capital lease, $19,500
  16. p. decrease in salaries payable, $2,300
  17. q. beginning cash balance, $20,300


  1. 1. Prepare the statement of cash flows.
  2. 2. Assume the company’s preferred stock has been selling for $120 per share during 2019. How many shares would the company have had to issue to avoid having a decrease in cash during the year? Where would this issuance have been reported in the statement of cash flows?


To determine

Prepare cash flow statement of W Company for the year ended 2019.


Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

Indirect method: Under indirect method, net income is reported first, and then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.

Prepare cash flow statement

W company
Statement of cash flow for the year ended 2019 (Indirect Method)
Operating activities:  
Net income59,200 
Adjustment for non-cash income items  
Add: Depreciation expense12,600 
Amortization of discount on bonds payable1,900 
Increase in deferred tax payable5,000 
Less: Gain on sale of land(5,300) 
Adjustment for cash flow effects from working capital:  
Increase in accounts receivable(7,400) 
Decrease in inventory3,700 
Increase in accounts payable4,500 


To determine

Ascertain the number of preferred stock issued by company to avoid decrease in cash.

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