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Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash	$	13			$	12
Accounts receivable		305				230
Inventory		158				195
Prepaid expenses		8				5
Total current assets		484				442
Property, plant, and equipment		509				430
Less accumulated depreciation		(86	)			(70	)
Net property, plant, and equipment		423				360
Long-term investments		23				30
Total assets	$	930			$	832
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	226
Accrued liabilities		73				77
Income taxes payable		73				64
Total current liabilities		448				367
Bonds payable		199				171
Total liabilities		647				538
Common stock		163				200
Retained earnings		120				94
Total stockholders’ equity		283				294
Total liabilities and stockholders' equity	$	930			$	832

Weaver Company Income Statement For This Year Ended December 31
Sales					$	752
Cost of goods sold						448
Gross margin						304
Selling and administrative expenses						221
Net operating income						83
Nonoperating items:
Gain on sale of investments	$	5
Loss on sale of equipment		(3	)			2
Income before taxes						85
Income taxes						22
Net income					$	63

During this year, Weaver sold some equipment for $18 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $12 that had cost $7 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $37 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

Weaver Company
Statement of Cash Flows
For this year Ended December 31
Operating Activities:
Net income		63
Adjustment to convert net income to a cash basis
Add: Depreciation [86-(70-10)]	26
Add: Loss on sale of equipment	3
Less: Gain on sale of investments	-5
Less: Increase in accounts receivable (230-305)	-75
Add: Decrease in inventory (195-158)	37
Less: Increase in prepaid expenses (5-8)	-3
Add: Increase in accounts payable (302-226)	76
Less: Decrease in accrued liabilities (73-77)	-4
Add: Increase in income taxes payable (73-64)	9
		64
Net cash provided by operating activities (A)		127
Investing activities:
Additions to property,plant and equipment [509-(430-31)]	-110
Sale of property,plant and equipment	18
Sale of long-term investments	12
Net cash used in investing activities (B)		-80
Financing activities:
Repurchase of common stock	-37
Issuance of bonds	28
Dividends paid (94+63-120)	-37
Net cash used in financing activities ( C)		-46
Net Increase in cash (A+B+C)		1
Add: Beginning cash and cash equivalents		12
Ending cash and cash equivalents		13

Note:

Beginning balance of accumulated depreciation on Equipment unsold = $70-$10 = $60

Ending balance of accumulated depreciation = $86

Depreciation expense for the current year = $86-$60 = $26

Beginning balance of Equipment unsold = $430-$31 = $399

Ending balance of Equipment = $509

Additions to equipment = $509 -$399 = $110