Prepare a statement of cash flows for Wonder Inc. for the year ending December 31, 2021, using
Question:
Prepare a statement of cash flows for Wonder Inc. for the year ending December 31, 2021, using the indirect method. Wonder has adopted the policy of classifying interest paid as operating and dividends paid as financing activities.
1. Prepare the operating activities section of the statement of cash flows (6 marks)
Net earnings (loss) | |
Net cash provided by (used in) operating activities |
2. Prepare the investing activities section of the statement of cash flows. (3 marks)
Net cash provided by (used in) investing activities |
3. Prepare the financing activities section of the statement of cash flows. (5 marks)
Net cash provided (used in) financing activities |
4. Using the direct method, prepare below the cash flow from operating activities section only for Wonder Company for the year ended December 31, 202 (6 marks)
Operating activities section of the statement of cash flows-Direct Method
5. Wonder Company has adopted the policy of classifying interest paid as operating and dividends paid as financing activities. Under IFRS, Wonder Company has other alternatives for classifying interest and dividend amounts paid. Fill in the blank following the statements below.(2 marks)
Interest paid can also be classified on the SCF as_________________________________________________________________
Dividends paid can also be classified on the SCF as____________________________________________________________________________
6. Assume that you are a shareholder of Wonder company, what do you think of the dividend payout ratio that is highlighted in the statement of cash flows for the year ended December 31,2021? Compute the dividend payout ratio and briefly discuss whether this is a positive sign. The average dividend payout for the industry is 20%. (2 marks)
______________________________________________________________________________
______________________________________________________________________________
Additional information:
- There were 20,000 common shares issued and outstanding at December 31, 2020.
- In June 2021 the company issued a 10% stock dividend, valued at market price per share of $12.
- The company sold equipment that had an original cost of $292,000 and a net book value of $123,800. Other equipment was purchased for cash. Patent amortization was $4,000.
- Long-term debt with a face value of $400,000 was repaid during the year and other long-term debt was issued at a lower interest rate.
- The company issued shares for land during the period. Other common shares retired (bought back and cancelled) at book value
- All sales during the year were made on the account. All merchandise was purchased on account, making up the total accounts payable account.
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy