Question

Waterway Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

WATERWAY INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
		12/31/17			12/31/16
Cash		$5,900			$6,900
Accounts receivable		61,400			51,200
Short-term debt investments (available-for-sale)		34,700			18,000
Inventory		40,200			59,700
Prepaid rent		5,000			4,100
Equipment		152,700			130,200
Accumulated depreciation—equipment		(35,400	)		(25,000	)
Copyrights		45,700			49,900
Total assets		$310,200			$295,000
Accounts payable		$46,300			$40,400
Income taxes payable		3,900			6,000
Salaries and wages payable		8,100			3,900
Short-term loans payable		8,100			10,100
Long-term loans payable		60,200			69,400
Common stock, $10 par		100,000			100,000
Contributed capital, common stock		30,000			30,000
Retained earnings		53,600			35,200
Total liabilities & stockholders’ equity		$310,200			$295,000

WATERWAY INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue				$335,075
Cost of goods sold				175,200
Gross profit				159,875
Operating expenses				120,100
Operating income				39,775
Interest expense		$11,400
Gain on sale of equipment		2,000		9,400
Income before tax				30,375
Income tax expense				6,075
Net income				$24,300

Additional information:

1.		Dividends in the amount of $5,900 were declared and paid during 2017.
2.		Depreciation expense and amortization expense are included in operating expenses.
3.		No unrealized gains or losses have occurred on the investments during the year.
4.		Equipment that had a cost of $20,100 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities:
Net income		24300
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation expense	24470
Amortization of Copyright	4200
Gain on Sale of Equipment	-2000
Increase in Accounts receivable	-10200
Decrease in inventory	19500
Increase in Prepaid rent	-900
Increase in accounts payable	5900
Decrease in Income taxes payable	-2100
Increase in Salaries and wages payable	4200
		43070
Net cash provided by operating activities		67370
Cash Flows from Investing Activities:
Sale of Equipment	8030
Purchase of Equipment	-42600
Purchase of Investments	-16700
Net Cash used by Investing Activities		-51270
Cash Flows from Financing Activities
Principal Payment on Short-term Loan	-2000
Principal Payment on Long-term Loan	-9200
Dividend Payments	-5900
Net Cash Used by Financing Activities		-17100
Net Decrease in Cash		-1000
Cash at Beginning of Period		6900
Cash at End of Period		5900