Question

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash and cash equivalents	$	17			$	11
Accounts receivable		290				230
Inventory		156				194
Prepaid expenses		8				5
Total current assets		471				440
Property, plant, and equipment		511				433
Less accumulated depreciation		(83	)			(70	)
Net property, plant, and equipment		428				363
Long-term investments		26				32
Total assets	$	925			$	835
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	225
Accrued liabilities		72				79
Income taxes payable		71				64
Total current liabilities		445				368
Bonds payable		196				171
Total liabilities		641				539
Common stock		164				201
Retained earnings		120				95
Total stockholders’ equity		284				296
Total liabilities and stockholders' equity	$	925			$	835

Weaver Company Income Statement For This Year Ended December 31
Sales					$	751
Cost of goods sold						450
Gross margin						301
Selling and administrative expenses						221
Net operating income						80
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(2	)			4
Income before taxes						84
Income taxes						22
Net income					$	62

During this year, Weaver sold some equipment for $19 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 $6 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.

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.)

Answer 1

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$                62
Adjustments
Depreciation	$              23			=83-70+10
Gain on sale of investment	$               -6
Loss on sale of equipment	$                2
Increase in Accounts Receivable	$             -60			=230-290
Decrease in Inventory	$              38			=194-156
Increase in Prepaid Expenses	$               -3			=5-8
Increase in Accounts payable	$              77			=302-225
Decrease in Accrued Liabilities	$               -7			=72-79
Increase in Income tax payable	$                7			=71-64
Total Adjustments		$                71
Net Cash from operating activities			$            133
Cash flow from Investing Activities
Sale of Equipment		$                19
Sale of Investment		$                12
Purchase of Equipment		$            -109		=433-31-511
Net Cash used in investing activities			$             -78
Cash flow from Financing Activities
Purchase of Treasury Stock		$               -37
Issue of Bonds Payable		$                25		=196-171
Payment of cash dividends		$               -37
Net Cash from financing activities			$             -49
Net Increase in cash			$                6
Beginning Balance of Cash			$              11
Ending Balance of Cash			$              17