Question
Problem #1 Statement of Cash Flows The following Statement of Cash Flows was prepared for the Baines Corporation. Walker Corporation Statement of Sources and Uses
Problem #1 Statement of Cash Flows
The following Statement of Cash Flows was prepared for the Baines Corporation.
Walker Corporation
Statement of Sources and Uses of Cash
Year Ended December 31, 2017
Sources of cash
Net income $111,000
Depreciation and depletion 70,000
Increase in long-term debt 179,000
Changes in current receivables and inventories,
less current liabilities 14,000
$374,000
Uses of cash
Cash dividends $ 60,000
Expenditure for property, plant, and equipment 214,000
Investments and other uses 20,000
Change in cash 80,000
The following additional information relating to Walker Corporation is available for the year ended December 31, 2017.
1. Wage and salary expense attributable to stock option plans was $25,000 for the year.
2. Expenditures for property, plant, and equipment $250,000
Proceeds from retirements of property, plant, and equipment 36,000
Net expenditures $214,000
3. A stock dividend of 10,000 shares of Walker Corporation common stock was distributed to common stockholders on April 1, 2017, when the per share market price was $7 and par value was $1.
4. On July 1, 2017, when its market price was $6 per share, 16,000 shares of Walker Corporation common stock were issued in exchange for 4,000 shares of preferred stock.
5. Depreciation expense $ 65,000
Depletion expense 5,000
$ 70,000
6. Increase in long-term debt $620,000
Retirement of debt 441,000
Net increase $179,000
Required:
A. In general, what are the objectives of a statement of the type shown above for Walker Corporation? Explain
B. Identify the weaknesses in the form and format of Walker Corporation's statement of cash flows without reference to the additional information. (Assume adoption of the indirect method.)
C. For each of the six items of additional information for the statement of cash flows, indicate the preferable treatment and explain why the suggested treatment is preferable.
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