Question

Problem 12-09A Condensed financial data of Waterway Industries follow. Waterway Industries Comparative Balance Sheets December 31 Assets 2022 2021 Cash $ 129,280 $ 77,440 Accounts receivable 140,480 60,800 Inventory 180,000 164,560 Prepaid expenses 45,440 41,600 Long-term investments 220,800 174,400 Plant assets 456,000 388,000 Accumulated depreciation (80,000 ) (83,200 ) Total $1,092,000 $823,600 Liabilities and Stockholders’ Equity Accounts payable $ 163,200 $ 107,680 Accrued expenses payable 26,400 33,600 Bonds payable 176,000 233,600 Common stock 352,000 280,000 Retained earnings 374,400 168,720 Total $1,092,000 $823,600 Waterway Industries Income Statement Data For the Year Ended December 31, 2022 Sales revenue $621,536 Less: Cost of goods sold $216,736 Operating expenses, excluding depreciation 19,856 Depreciation expense 74,400 Income tax expense 43,648 Interest expense 7,568 Loss on disposal of plant assets 12,000 374,208 Net income $ 247,328 Additional information: 1. New plant assets costing $160,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $92,000 and accumulated depreciation of $77,600 were sold for $2,400 cash. 3. Bonds payable matured and were paid off at face value for cash. 4. A cash dividend of $41,648 was declared and paid during the year. Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

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Cash flows from operating activities
Net income			$     247,328
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense		$       74,400
Loss on disposal of plant assets		$       12,000
Increase in accounts receivable		$     -79,680
Increase in inventory		$     -15,440
Increase in prepaid Expense		$        -3,840
Increase in accounts payable		$       55,520
Decrease in Accrued expense payable		$        -7,200
Total adjustments			$       35,760
Net cash provided by operating activities			$     283,088
Cash flows from investing activities:
Proceeds on sale of plant assets		$         2,400
Purchase of New investment		$     -46,400
Purchase of plant assets		$   -160,000
Net cash used by investing activities			$   -204,000
Cash flows from financing activities:
Issue of common stock		$       72,000
Payment of Bond Payable		$     -57,600
Payment of dividend		$     -41,648
Net cash used by financing activities			$     -27,248
Net increase in cash and cash equivalents			$       51,840
Cash and cash equivalents, Beginning			$       77,440
Cash and cash equivalents,Ending			$     129,280	$               -