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Statement of Cash Flows (Direct Method) The Wolff Company’s income statement and comparative balance sheets at...

Statement of Cash Flows (Direct Method)

The Wolff Company’s income statement and comparative balance sheets at December 31 of 2016 and 2015 are shown below:

WOLFF COMPANY
Income Statement
For the Year Ended December 31, 2016
Sales Revenue $645,000
Cost of Goods Sold $430,000
Wages Expense 86,000
Insurance Expense 12,000
Depreciation Expense 13,000
Interest Expense 12,000
Income Tax Expense 29,000 582,000
Net Income $63,000
WOLFF COMPANY
Balance Sheets
Dec. 31, 2016 Dec. 31, 2015
Assets
Cash $52,000 $8,000
Accounts Receivable 41,000 32,000
Inventory 90,000 60,000
Prepaid Insurance 5,000 7,000
Plant Assets 219,000 195,000
Accumulated Depreciation (68,000) (55,000)
Total Assets $339,000 $247,000
Liabilities and Stockholders’ Equity
Accounts Payable $7,000 $10,000
Wages Payable 9,000 6,000
Income Tax Payable 6,000 7,000
Bonds Payable 141,000 75,000
Common Stock 90,000 90,000
Retained Earnings 86,000 59,000
Total Liabilities and Stockholders’ Equity $339,000 $247,000


Cash dividends of $36,000 were declared and paid during 2016. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi‑annually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during 2016.
b. Prepare a statement of cash flows using the direct method.
c. Compute free cash flow.
d. Compute the operating‑cash‑flow‑to‑current‑liabilities ratio.
e. Compute the operating‑cash‑flow‑to‑capital‑expenditures ratio.

a. Change in Cash during 2016 $Answer AnswerIncreaseDecrease

b. Use a negative sign with cash outflow answers.

WOLFF COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Cash Flow from Operating Activities
Cash Received from Customers Answer
Cash Paid for Merchandise Purchased Answer
Cash Paid to Employees Answer
Cash Paid for Insurance Answer
Cash Paid for Interest Answer
Cash Paid for Income Taxes Answer Answer
Cash Provided by Operating Activities Answer
Cash Flow from Investing Activities
Purchase of Plant Assets Answer
Cash Flow from Financing Activities
Issuance of Bonds Payable Answer
Payment of Dividends Answer
Cash Provided by Financing Activities Answer
Net Change in Cash Answer
Cash at Beginning of Year Answer
Cash at End of Year Answer

c. Compute free cash flow $Answer

d. Compute the operating‑cash‑flow‑to‑current‑liabilities ratio.
Round answer to two decimal places.
Answer

e. Compute the operating‑cash‑flow‑to‑capital‑expenditures ratio.
Round answer to two decimal places.
Answer

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