Direct Method Cash Flow Statement
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The following transactions occurred during March 2011 for Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 30,000 shares of capital stock in exchange for $300,000 in cash
2. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled 120,000. The cost of goods sold was $70,000.
5. Paid $5,000 in rent on a warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one year period beginning April 1, 2011.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
1. 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.
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Solution Summary
The solution prepares direct method cash flow statement for Wainwright Corporation.
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