The following transactions occurred during March 2011 for the Wainwright Corporation. The company owns an operates a wholesale warehouse.
1. Issued 30,000 shares of capitaql stock in exchange for 300,00 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 5,000in 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, 2011
7. Paid 70,000 on account for the merchandise purchased in3
8. Collected 55,000 from customers on account
9. Recorded depreciation expense of 1,000 for the month on the equipment
Required:
1. Analyzed 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).
Example:
Financing Investing Operating
1. 300,000
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