Condensed financial data of Wanwright Company are shown below. Wanwright reports under ASPE.

WANWRIGHT COMPANYIncome StatementFor the Year Ended December 31, 2021

Sales .................................................................. $297,500Gain on sale of plant assets ................................. 5,000..............................................................................302,500

Less:Cost of goods sold ............................................ 119,460Operating expenses ........................................... 14,670Depreciation expense ........................................ 35,500Income taxes ....................................................... 27,270Interest expense ................................................... 2,940Total expenses .................................................. 199,840Profit ................................................................ $102,660

Additional information:

1. New plant assets costing $141,000 were purchased for cash during the year.

2. Long-term investments were sold at cost.

3. Plant assets costing $36,000 were sold for $15,000, resulting in a gain of $5,000.

4. A cash dividend of $38,000 was declared and paid during the year.

Instructions

a. Prepare a statement of cash flows using the indirect method.

b. Calculate the free cash flow.

Taking It Further

If a company has a loss, does that mean that there has also been a net reduction in cash from operating activities? Explain.

Transcribed Image Text:

WANWRIGHT COMPANY Balance Sheet December 31 Assets 2021 2020 $ 92,700 $ 33,400 Cash Accounts receivable 70,800 37,000 102,650 Inventory Long-term investments 131,900 84,500 107,000 Plant assets 310,000 205,000 Accumulated depreciation (49,500) (40,000) Total $640,400 $445,050 Liabilities and Shareholders' Equity $ 62,700 $ 48,280 Accounts payable Salaries payable Notes payable 15,100 18,830 140,000 70,000 200,000 107,940 Common shares 250,000 Retained earnings 172,600 $640,400 Total $445,050