E4-19 - Wainwright Corporation - ACC305 Intermediate Accounting I Ashford

University
Required:
1.Analyze each transaction and classify each as a financing, investing and/or
operating activity (a transaction can represent more than one type of activity). In
doing so, also indicate the cash effect of each, if any. If there is no cash effect,
simply place a check mark () in the appropriate column(s).
2.Prepare a statement of cash flows, using the direct method to present cash flows
from operating activities. Assume the cash balance at the beginning of the month
was $40,000.

Exercise 4-19
Requirement 1
1.
2.
3.
4.
5.
6.
7.
8.
9.

Financing
$300,000

Investing

Operating

$(10,000)

$ (5,000)
(6,000)
(70,000)
55,000

__________

__________

__________

$300,000

$(10,000)

$(26,000)

$264,000

Requirement 2

Wainwright Corporation
Statement of Cash Flows
For the Month Ended March 31, 2011

Cash flows from operating activities:

Collections from customers

$ 55,000

Payment of rent

(5,000)

Payment of one-year insurance premium

(6,000)

Payment to suppliers of merchandise for sale (70,000)

Net cash flows from operating activities

$ (26,000)

Cash flows from investing activities:

Purchase of equipment

(10,000)

Net cash flows from investing activities

(10,000)

Cash flows from financing activities:

Issuance of common stock
Net cash flows from financing activities
Net increase in cash
Cash and cash equivalents, March 1
Cash and cash equivalents, March 31

300,000
300,000
264,000
40,000
$ 304,000

Noncash investing and financing activities:

Acquired $40,000 of equipment by paying cash and issuing a note as follows:

Cost of equipment
$40,000
Cash paid
Note issued

10,000
$30,000