he following transactions occurred during March 2009 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 30,000 shares of common stock in exchange for $300,000 in cash.
2. Purchased equipment of a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
5. Paid $5,000 in rent on the warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1,2009.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
Q1- analysis each transactions:
FINANCING INVESTING OPERATING
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Q2- prepare a statement of cash flows using the direct method to present cash flows from operating activities assume that the balance at the beginning of the month was$40000
To analyze each transaction in terms of financing, investing, and operating activities:
1. Issued 30,000 shares of common stock in exchange for $300,000 in cash.
This transaction is categorized as financing activity because it involves the issuance of common stock, which represents an inflow of cash from shareholders.
2. Purchased equipment of a cost of $40,000. $10,000 cash was paid, and a note payable was signed for the balance owed.
This transaction is categorized as investing activity because it involves the purchase of equipment, which is considered a long-term asset that will be used to generate revenue.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
This transaction is categorized as an operating activity because it involves the purchase of inventory, which is a necessary step in the company's day-to-day operations.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
This transaction is categorized as an operating activity because it represents revenues earned from the primary business operations (credit sales) and the corresponding cost of goods sold.
5. Paid $5,000 in rent on the warehouse building for the month of March.
This transaction is categorized as an operating activity because it represents an expense incurred in the normal course of business operations.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2009.
This transaction is categorized as an operating activity because it represents the payment of an expense related to a future period of coverage.
7. Paid $70,000 on account for the merchandise purchased in 3.
This transaction is categorized as an operating activity because it involves the payment of an accounts payable related to an operating transaction (purchase of inventory).
8. Collected $55,000 from customers on account.
This transaction is categorized as an operating activity because it represents the collection of accounts receivable, which are revenues generated from credit sales.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
This transaction is categorized as an operating activity because it represents the recognition of an expense associated with the ongoing use of equipment.
To prepare a statement of cash flows using the direct method to present cash flows from operating activities with an assumed beginning balance of $40,000, you would need additional information about cash receipts and cash payments related to operating activities during the month. The given information does not provide this information.