The following transactions occurred during March 2016 for the Wainwright Corporation. The company owns and operates a
Question:
The following transactions occurred during March 2016 for the 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 the goods sold was $70,000. |
5. | Paid $5,000 in rent on the 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, 2016. |
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. |
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.(Amounts to be deducted should be indicated with a minus sign. If there is no cash effect, leave cell blank.) |
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.(Amounts to be deducted should be indicated with a minus sign.) |