Chapter 21, Problem 21.2P

Statement of cash flows; direct method

• LO21–3, LO21–8

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for Wright Company. Additional information from Wright’s accounting records is provided also.

Additional information from the accounting records:

a. Land that originally cost $10,000 was sold for $7,000.

b. The common stock of Microsoft Corporation was purchased for $25,000 as a short-term investment not classified as a cash equivalent.

c. New equipment was purchased for $150,000 cash.

d. A $30,000 note was paid at maturity on January 1.

e. On January 1, 2018, bonds were sold at their $60,000 face value.

f. Common stock ($50,000 par) was sold for $76,000.

g. Net income was $80,000 and cash dividends of $35,000 were paid to shareholders.

Required:

Prepare the statement of cash flows of Wright Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income with cash flows from operating activities.)