Question

1. Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash and cash equivalents	$	14			$	13
Accounts receivable		292				230
Inventory		159				195
Prepaid expenses		9				5
Total current assets		474				443
Property, plant, and equipment		513				434
Less accumulated depreciation		(83	)			(71	)
Net property, plant, and equipment		430				363
Long-term investments		24				31
Total assets	$	928			$	837
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	225
Accrued liabilities		72				80
Income taxes payable		74				64
Total current liabilities		448				369
Bonds payable		195				170
Total liabilities		643				539
Common stock		163				202
Retained earnings		122				96
Total stockholders’ equity		285				298
Total liabilities and stockholders' equity	$	928			$	837

Weaver Company Income Statement For This Year Ended December 31
Sales					$	753
Cost of goods sold						447
Gross margin						306
Selling and administrative expenses						222
Net operating income						84
Nonoperating items:
Gain on sale of investments	$	5
Loss on sale of equipment		(1	)			4
Income before taxes						88
Income taxes						23
Net income					$	65

During this year, Weaver sold some equipment for $19 that had cost $30 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 $39 of its own stock. This year Weaver did not retire any bonds.

Problem 13-7 Part 1

Required:

1. Using the indirect method, determine the net cash provided by/used in operating activities for this year. (List any deduction in cash and cash outflows as negative amounts.)

2. Using the information from Part 1, 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

Operating Activities

Net Income 65

Adjustments to convert net income to a cash basis:-

Depreciation expense 20

Gain on sale of investments   (5)

Loss on sale of equipment 1

Increase in accounts receivable (62)

Increase in prepaid expense (4)

Decrease in inventory 36

Increase in accounts payable 77

Decrease in accrued liability (8)

Increase in income tax payable 10 65   

Net Cash provided by operating activities 130

Investing Activities

Sale of equipment   19

Sale of long term investment 12

Purchase of plant & equipment (20)

Net cash used in investing activities (11)

Financing Activities

Increase in bonds payable 25

Decrease in common stock (39)   

Dividend paid(amount not given) ()

Net cash used in financing activities (14)   

Net increase in cash and cash equivalents 105

Cash and cash equivalents at the beginning of the year 13

Cash and cash equivalents at the end of the year 14

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