Question

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash	$	5			$	12
Accounts receivable		309				230
Inventory		156				196
Prepaid expenses		8				6
Total current assets		478				444
Property, plant, and equipment		510				430
Less accumulated depreciation		(85	)			(72	)
Net property, plant, and equipment		425				358
Long-term investments		28				35
Total assets	$	931			$	837
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	226
Accrued liabilities		72				79
Income taxes payable		74				64
Total current liabilities		448				369
Bonds payable		200				172
Total liabilities		648				541
Common stock		163				200
Retained earnings		120				96
Total stockholders’ equity		283				296
Total liabilities and stockholders' equity	$	931			$	837

Weaver Company Income Statement For This Year Ended December 31
Sales					$	754
Cost of goods sold						450
Gross margin						304
Selling and administrative expenses						223
Net operating income						81
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(3	)			3
Income before taxes						84
Income taxes						23
Net income					$	61

During this year, Weaver sold some equipment for $18 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 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.)

Required information

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Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash	$	5			$	12
Accounts receivable		309				230
Inventory		156				196
Prepaid expenses		8				6
Total current assets		478				444
Property, plant, and equipment		510				430
Less accumulated depreciation		(85	)			(72	)
Net property, plant, and equipment		425				358
Long-term investments		28				35
Total assets	$	931			$	837
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	226
Accrued liabilities		72				79
Income taxes payable		74				64
Total current liabilities		448				369
Bonds payable		200				172
Total liabilities		648				541
Common stock		163				200
Retained earnings		120				96
Total stockholders’ equity		283				296
Total liabilities and stockholders' equity	$	931			$	837

Weaver Company Income Statement For This Year Ended December 31
Sales					$	754
Cost of goods sold						450
Gross margin						304
Selling and administrative expenses						223
Net operating income						81
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(3	)			3
Income before taxes						84
Income taxes						23
Net income					$	61

During this year, Weaver sold some equipment for $18 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 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.

Weaver Company
Statement of Cash Flows—Indirect Method (partial)
		0
		$0

Weaver Company
Statement of Cash Flows
For This Year Ended December 31
Operating activities:
Investing activities:
		0
Financing activities:
		0
		0
Beginning cash and cash equivalents
Ending cash and cash equivalents		$0

Answer 1

Weaver Company
Statement of Cash Flows—Indirect Method (partial) (Amts in $)
Net Income		61
Adjustments to reconcile net income to operating cash flows:
Add: Depreciation Expense ($85 Acc. Dep. Closing Bal.+$10 Acc. Dep. on sale-$72 Acc Dep. Beg. Bal)	23
Less: Gain on sale of investments	(6)
Add: Loss on sale of equipment	3
Less: Increase in Accounts Receivable ($309-$230)	(79)
Add: Decrease in Inventory ($196-$156)	40
Less: Increase in Prepaid Expense ($8-$6)	(2)
Add: Increase in Accounts Payable ($302-$226)	76
Less: Decrease in Accrued Liabilities ($79-$72)	(7)
Add: Increase in Income taxes payable ($74-$64)	10
Total Adjustments		58
Net Cash provided by Operating Activities ($61+$58)		119

Weaver Company
Statement of Cash Flows
For This Year Ended December 31 (Amts in $)
Operating activities:
Net Cash Provided by Operating Activities (A)		119
Investing activities:
Sale of Equipment	18
Sale of long term investment	13
Purchase of Equipment ($510 Closing Bal+$31 Cost of equipment sold-$430 Beg. Bal)	(111)
Net Cash used in Investing Activities (B)		(80)
Financing activities:
Issue of Bonds ($200-$172)	28
Repurchase of own stock ($200-$163)	(37)
Cash Dividend paid ($96 Retained Earning Beg. Bal+$61 Net Income-$120 Retained Earning Clo Bal.)	(37)
Net Cash used in Financing Activities (C)		(46)
Net Increase/(decrease) in cash and cash Equivalents (D = A+B+C)		(7)
Beginning cash and cash equivalents (E)		12
Ending cash and cash equivalents (D+E)		5