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Kennedy, Inc. reported the following data:

Net income $127,659
Depreciation expense 16,038
Loss on disposal of equipment 11,080
Gain on sale of building 18,917
Increase in accounts receivable 7,995
Decrease in accounts payable 3,476
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash outflows, a decrease in cash, cash payments, or any negative adjustments.

Kennedy, Inc.
Statement of Cash Flow

Cash flows from operating activities:
Net income
$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense

Loss on disposal of equipment

Gain on sale of building

Changes in current operating assets and liabilities:
Increase in accounts receivable

Decrease in accounts payable

Net cash flow from operating activities

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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Cash flows from Operating Activities
Income Statement Indirect Method Direct Method
Net income
Adjustments:
Sales $311 Decrease in accounts receivable 7 Cash receivedfrom customers
Gain on sale of equipment 25 Gain on sale of equipment (25)(Not reported—no cash effect)
Cost of goods sold Increase in inventory (13)
Increase in accounts payable 19 Cash paid to suppliers(175)
Salaries expense (44)
7 Cash paid to employees (37)
Depreciation expense (10) Depreciation expense 10 Cash paidfor depreciation
Interest expense Decrease in bond discount 4 Cash paid forinterest (10)
Insurance expense (23) Decrease in prepaid insurance 10 Cashpaid for insurance
Loss on sale of land (7) Loss on sale of land 7 (Notreported—no cash effect)
Income tax expense (29) Increase in income tax payable Cashpaid for income taxes (22)
Net Income $223 Net cash flows from operating activities $26Net cash flows from operating activities $-244

Statement of Cash Flows

The following is a list of the items to be included in thepreparation of Warrick Company's 2016 statement of cash flows:

Net income, $59,200

Payment for purchase of building, $98,000

Increase in accounts receivable, $7,400

Proceeds from issuance of common stock, $37,100

Increase in accounts payable, $4,500

Proceeds from sale of land, $7,000

Depreciation expense, $12,600

Payment of dividends, $36,000

Gain on sale of land, $5,300

Decrease in inventory, $3,700

Payment for purchase of long-term investments, $9,600

Amortization of discount on bonds payable, $1,900

Proceeds from issuance of note, $18,000

Increase in deferred taxes payable, $5,000

Equipment acquired by capital lease, $19,500

Decrease in salaries payable, $2,300

Beginning cash balance, $20,300

Required

1. Prepare the statement of cash flows.

WARRICK COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:
Net income $
Adjustment for noncash income items:
Add: Depreciation expense
Add: Amortization of discount on bonds payable
Add: Accumulated depreciation
Less: Gain on sale of land
Adjustments for cash flow effects
from working capital items:
Increase in accounts receivable
Decrease in inventory
Increase in accounts payable
Decrease in salaries payable
Net cash provided by operating activities $
Investing Activities:
Payment for purchase of building $
Proceeds from sale of land
Payment for purchase of long-term investments
Net cash used for investing activities
Financing Activities:
Proceeds from issuance of common stock $
Payment of accounts payable
Proceeds from issuance of note
Net cash provided by financing activities
Net Decrease in Cash $
Cash, January 1, 2016
Cash, December 31, 2016 $
Investing and Financing Activities Not Affecting Cash
Investing Activities:
Acquisition of equipment under capital lease $
Financing Activities:
Incurrence of capital lease obligation for equipment

The net income reported on the income statement for the currentyear was $364,000. Depreciation recorded on store equipment for theyear amounted to $14,500. Balances of the current asset and currentliability accounts at the beginning and end of the year are asfollows:

End of Year

Beginning of Year
Cash $43,210 $38,400
Accounts receivable (net) 31,360 29,020
Merchandise inventory 39,590 45,160
Prepaid expenses 4,740 3,670
Accounts payable (merchandise creditors) 41,480 35,590
Wages payable 21,910 22,970

Required:

A. Prepare the Cash Flows from Operating Activities section of thestatement of cash flows, using the indirect method. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign to indicatecash outflows, cash payments, decreases in cash and for anyadjustments, if required.

B

Amount Descriptions
Amortization of intangible assets
Decrease in accounts payable
Decrease in accounts receivable
Decrease in merchandise inventory
Decrease in prepaid expenses
Decrease in wages payable
Depreciation
Increase in accounts payable
Increase in accounts receivable
Increase in merchandise inventory
Increase in prepaid expenses
Increase in wages payable
Net cash flow from operating activities
Net cash flow used for operating activities
Net income

Net loss

A. Prepare the Cash Flows from Operating Activities section ofthe statement of cash flows, using the indirect method. Refer tothe Amount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign to indicatecash outflows, cash payments, decreases in cash and for anyadjustments, if required.

Statement of Cash Flows (partial)

1

Cash flows from operatinactivities:

2

3

Adjustments to reconcile net income to net cash flow fromoperating activities:

4

5

Changes in current operating assets and liabilities:

6

7

8

9

10

11

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