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Problem 12-7A Prepare a Statement of Cash Flows [LO12-1, LO12-2] [The following information applies to the...

Problem 12-7A Prepare a Statement of Cash Flows [LO12-1, LO12-2]

[The following information applies to the questions displayed below.]

Comparative financial statements for Weaver Company follow:
Weaver Company
Comparative Balance Sheet
December 31, 2015 and 2014
2015 2014
  Assets
  Cash $ 3     $ 12    
  Accounts receivable 308     229    
  Inventory 159     196    
  Prepaid expenses 8     5    
  Total current assets 478     442    
  Property, plant, and equipment 515     435    
      Less accumulated depreciation (86)    (72)   
  Net property, plant, and equipment 429     363    
  Long-term investments 27     33    
  Total assets $ 934     $ 838    
  Liabilities and Stockholders' Equity
  Accounts payable $ 302     $ 225    
  Accrued liabilities 73     80    
  Income taxes payable 72     64    
  Total current liabilities 447     369    
  Bonds payable 198     171    
  Total liabilities 645     540    
  Common stock 165     201    
  Retained earnings 124     97    
  Total stockholders’ equity 289     298    
  Total liabilities and stockholders' equity $ 934     $ 838    
Weaver Company
Income Statement
For the Year Ended December 31, 2015
  Sales $ 753  
  Cost of goods sold 450  
  Gross margin 303  
  Selling and administrative expenses 219  
  Net operating income 84  
  Nonoperating items:
      Gain on sale of investments $ 6   
      Loss on sale of equipment (2)   4  
  Income before taxes 88  
  Income taxes
25  
  Net income $ 63  

     During 2015, 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. A cash dividend was paid during 2015 and the company repurchased $36 of its own stock. Weaver did not retire any bonds during 2015.

Part 1

Required:
1.

Using the indirect method, determine the net cash provided by/used by operating activities for 2015. (Negative amount should be entered with a minus sign.)

Part 2

2.

Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.)

Solutions

Expert Solution

1.

Weaver Company
Partial Statement of Cash Flows (Indirect Method)
For the Year Ended December 31, 2015
Cash Flows from Operating Activities:
Net income 63
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense [86 - (72 - 10)] 24
Gain on sale of investments -6
Loss on sale of equipment 2
Increase in Accounts receivable -79
Decrease in Inventory 37
Increase in Prepaid expenses -3
Increase in Accounts payable 77
Decrease in Accrued liabilities -7
Increase in Income taxes payable 8 53
Net cash provided by operating activities 116

2.

Weaver Company
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities:
Net cash provided by operating activities 116
Cash Flows from Investing Activities:
Sale proceeds from equipment 19
Sale of long-term investment 12
Purchase of equipment [515 - (435 - 31)] -111
Net cash used by investing activities -80
Cash Flows from Financing Activities
Issuance of bonds payable 27
Repurchase of common stock (165 - 201) -36
Payment of cash dividends (97 + 63 - 124) -36
Net cash used by financing activities -45
Net increase (decrease) in cash -9
Cash balance, December 31, 2014 12
Cash balance, December 31, 2015 3

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