Question

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year			Last Year
Assets
Cash	$	9		$	15
Accounts receivable		340			240
Inventory		125			175
Prepaid expenses		10			6
Total current assets		484			436
Property, plant, and equipment		610			470
Less accumulated depreciation		93			85
Net property, plant, and equipment		517			385
Long-term investments		16			19
Total assets	$	1,017		$	840
Liabilities and Stockholders' Equity
Accounts payable	$	310		$	230
Accrued liabilities		60			72
Income taxes payable		40			34
Total current liabilities		410			336
Bonds payable		290			180
Total liabilities		700			516
Common stock		210			250
Retained earnings		107			74
Total stockholders’ equity		317			324
Total liabilities and stockholders' equity	$	1,017		$	840

Weaver Company Income Statement For This Year Ended December 31
Sales					$	800
Cost of goods sold						500
Gross margin						300
Selling and administrative expenses						213
Net operating income						87
Nonoperating items:
Gain on sale of investments	$	7
Loss on sale of equipment		(4	)			3
Income before taxes						90
Income taxes						27
Net income					$	63

During this year, Weaver sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that had cost $3 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $40 of its own stock. This year Weaver did not retire any bonds.

2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1

2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year.

Cash flow from operating activities		104
Cash flow from investing activities
Sale of equipment	20
Sale of long term investment	10
Purchase of equipment	(180)
Net cash flow from investing activities		(150)
Cash flow from financing activities
repurchased stock	(40)
Issue common stock	110
Dividend paid	(30)
Net cash flow from financing activities		40
Net cash flow		(6)
Beginning cash		15
Ending cash		9

Working note :

1. Using the indirect method, determine the net cash provided by/used in operating activities for this year.

Net income	63
Adjustment to reconcile net income
Depreciation exp	24
Gain on sale of investment	(7)
Loss on sale of equipment	4
Increase account receivable	(100)
Increase prepaid exp	(4)
Decrease inventory	50
Increase account payable	80
Increase income tax payable	6
decrease accured liabilities	(12)
Net cash flow from operating activities		104