Question

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year			Last Year
Assets
Cash	$	19		$	24
Accounts receivable		530			340
Inventory		155			220
Prepaid expenses		6			4
Total current assets		710			588
Property, plant, and equipment		650			540
Less accumulated depreciation		100			90
Net property, plant, and equipment		550			450
Long-term investments		9			44
Total assets	$	1,269		$	1,082
Liabilities and Stockholders' Equity
Accounts payable	$	360		$	270
Accrued liabilities		60			70
Income taxes payable		81			74
Total current liabilities		501			414
Bonds payable		340			240
Total liabilities		841			654
Common stock		254			350
Retained earnings		174			78
Total stockholders’ equity		428			428
Total liabilities and stockholders' equity	$	1,269		$	1,082

Weaver Company Income Statement For This Year Ended December 31
Sales					$	840
Cost of goods sold						470
Gross margin						370
Selling and administrative expenses						213
Net operating income						157
Nonoperating items:
Gain on sale of investments	$	7
Loss on sale of equipment		(4	)			3
Income before taxes						160
Income taxes						48
Net income					$	112

During this year, Weaver sold some equipment for $15 that had cost $45 and on which there was accumulated depreciation of $26. In addition, the company sold long-term investments for $42 that had cost $35 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $96 of its own stock. This year Weaver did not retire any bonds.

Required:

1. Using the direct method, adjust the company’s income statement for this year to a cash basis.

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

Using the direct method, adjust the company’s income statement for this year to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

	Weaver Company Direct Method of Determining the Net Cash flows from Operating activities Adjustments to a cash basis: 0 Adjustments to a cash basis: 0 Selling and administrative expenses Adjustments to a cash basis: 0 Income taxes Adjustments to a cash basis: 0 $0

Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.)

	Weaver Company Statement of Cash Flows For This Year Ended December 31 Operating activities: Cash received from customers Less cash disbursements for: Total cash disbursements 0 0 Investing activities: 0 Financing activities: 0 0 Beginning cash and cash equivalents Ending cash and cash equivalents $0

Answer 1

Req 1.
Cash received from customer:
Sales revenue		840
Adjustment to cash basis
Increase in Accounts receivable	-190	(530-340)
Cash received from customer:	650
Cash paid to Supplier
Cost of goods sold		470
Adjustment to cash basis
Depreciation expense	-36	(100+26-90)
Decrease in inventory	-65	(220-155)
Increase in accounts payable	-90	(360-270)
Cash paid to Supplier		279
Cash paid for selling admin expense:
Selling admin expense	213
Adjustment to cash basis
Increase in Prepaid expense	2	(6-4)
Decrease in Accrued liabilities	10	(70-60)
Cash paid for selling admin expense:	225
Cash paid for Income tax:
Income tax expese		48
Adjustment for cash basis
increase in income tax payable	-7	(81-74)
Cash paid for Income tax:	41
Req 2.
Cash flow Statement
Cashflows from operating activities:
Cash received from customer		650
Cash disbursed:
Cash paid to supplier			-279
Cash paid for selling admin expense	-225
Cash paid for income tax		-41
Net cash provided from Operating activities	105
Cash flows from Investing activities:
Sales of equipment			15
Purchase of equipment (650+45-540)	-155
Sale of long term investment		42
Net cash used in investing activities		-98
Cash flows from Financing activities:
Dividend paid	(78+112-174)	-16
Repurchase of treasury stock		-96
Issuance of bonds payable		100
Net cash used in financing activities		-12
Net decrease in cash				-5
Beginning balance of cash			24
Ending balance of cash			19