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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Statement of Cash Flows The following is a list of items for Witts Company’s 2019 statement of cash flows:

  1. a. receipt from sale of equipment, $2,700
  2. b. increase in inventory, $3,900
  3. c. net income, $13,500
  4. d. payment for purchase of building, $29,000
  5. e. depreciation expense, $8,700
  6. f. receipt from issuance of bonds, $8,000
  7. g. increase in prepaid expenses, $800
  8. h. loss on sale of equipment, $2,200
  9. i. payment of dividends, $5,200
  10. j. decrease in accounts receivable, $1,700
  11. k. issuance of common stock for land, $6,900
  12. l. decrease in accounts payable, $1,500
  13. m. beginning cash balance, S 10,200

Required:

  1. 1. Prepare the statement of cash flows.
  2. 2. Next Level Under IFRS, what alternative treatment of the payment of dividends is allowed? How would this affect the statement of cash flows?

1.

To determine

Prepare cash flow statement for W company.

Explanation

Statement of cash flows: Cash flow statement reports all the cash transactions which are responsible for inflow and outflow of cash. The results of these transactions are 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.

Operating activities: Operating activities include cash inflows and outflows from business operations.

Investing activities: Investing activities include cash inflows and cash outflows from purchase and sale of land, equipment, or investments.

Financing activities: Financing activities includes cash inflows and outflows from issuance of common stock and debt, and payment of debt and dividends.

Prepare cash flow statement:

W Company
Statement of cash flow
ParticularsAmount($)Amount($)
Operating Activities:  
Net income$13,500 
Adjustment for non-cash income items:  
Depreciation expenses8,700 
Loss on sale of asset2,200 
Adjustments for cash flow effects from working capital items:  
Decrease in accounts receivable1,700 
Increase in inventory(3,900)

2.

To determine

Explain alternative treatment for the payment of dividend under IFRS

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