Professional Simulation The professional simulation for this chapter asks you to address questions related to the accounting for the statement of cash flows.

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KWW Professional Simulation Statement of Cash Flows Time Remaining 1 hour 00 minutes Directions Situation Financial Statements Explanation Resources calculator Ellwood House, Inc. had the following condensed statement of financial position at the end of 2015. ELLWOOD HOUSE, INC. Statement of Financial Position December 31, 2015 Land $ 38,500 Share capital-ordinary $ 80,000 Plant assets 57,500 Retained earnings 23,500 Investments 40,000 Long-term notes payable 30,000 Current assets (non-cash) Cash 34,000 Bonds payable 32,000 10,000 Current liabilities 14,500 $180,000 $180,000 During 2016, the following occurred. 1. Ellwood House, Inc., sold part of its investment portfolio, which was classified as non-trading equity, for $15,500, resulting in a gain of $500 for the firm. 2. Dividends totaling $19,000 were paid to shareholders. 3. A parcel of land was purchased for $5,500. 4. $20,000 of ordinary shares were issued at par. 5. $10,000 of bonds payable were retired at par. 6. Heavy equipment was purchased through the issuance of $32,000 of bonds. 7. Net income for 2016 was $42,000 after allowing depreciation of $13,550. 8. Both current assets (other than cash) and current liabilities remained at the same amount. Directions Situation Financial Statements Explanation Resources Prepare a statement of cash flows for 2016, using the indirect method. Directions Situation Financial Statements Explanation Resources Draft a one-page letter to Gerald Brauer, president of Ellwood House, Inc., briefly explaining the changes within each major cash flow category. Refer to your cash flow statement whenever necessary.