Prior to the issuance of SFAS No. 95, companies commonly prepared a funds statement that reported the
Question:
Prior to the issuance of SFAS No. 95, companies commonly prepared a funds statement that reported the changes in working capital during the period. Analyze the following funds statement and describe its strengths and weaknesses as a communication tool.
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WINDLER ENTERPRISES Statement of Changes in Financial Position-Working Capital Basis For the Year Ended December 31, XXXX Sources of working capital: Income from continuing operations: Net income Add (deduct) items to convert to working capital: Depreciation expense Amortization of bond discount Gain on sale of equipment Loss on sale of land Working capital from operations Sale of equipment Sale of land Total working capital sources Uses of working capital: Cash dividends paid Machinery purchased Trading securities exchanged for note payable Total uses of working capital Increase in working capital during 1981 $132,000 23,700 300 (54,000) 3,000 105,000 159,000 15,000 $279,000 $ 45,000 30,000 12,000 $ 87,000 $192,000
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Strengths The funds statement provides a clear breakdown of sources and uses of working capital whic...View the full answer
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Introduction To AccountingAn Integrated Approach
ISBN: 9781119600107
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