ACC 421 Week 5
Problem 23-7 (P23-7) (SCF-Direct and Indirect Methods from Comparative
Financial Statements) George Winston Company, a major retailer of
bicycles and accessories, operates several stores and is a publicly
traded company. The comparative statement of financial position and
income statement for Winston as of May 31, 2008, are shown on the next
page. The company is preparing its statement of cash flows.
AND SO ON
The following is additional information concerning Winston’s transactions during the year ended
May 31, 2008.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.
Instructions
(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
(b) Prepare a statement of cash flows for Winston Company for the year
ended May 31, 2008, using the direct method. Be sure to support the
statement with appropriate calculations. (A reconciliation of net income
to net cash provided is not required.)
(c) Using the indirect method, calculate only the net cash flow from
operating activities for Winston Company for the year ended May 31,
2008.
Click here for the solution: George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company
