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

	Cash flow from Operating Activities
	Net Income		$ 247,328
Add	Loss on disposal of plant assets		$    12,000
Add	Depreciation		$    74,400
Less	Increase in accounts receivable		$   (79,680)
Less	Increase in inventory		$   (15,440)
Less	Increase in prepaid expenses		$     (3,840)
Add	Increase in accounts payable		$    55,520
Less	Decrease in accrued expenses		$     (7,200)
	Cash inflow from Operating activities		$ 283,088
	Cash flow from Investing Activities
	Sales of Plant asset		$      2,400
	Purchase of Investment		$   (46,400)
	Purchase of plant asset		$(160,000)
	Cash outflow from investing activities		$(204,000)
	Cash flow from financing activities
	Issue of new stock		$    72,000
	Cash dividend		$   (41,648)
	Bonds paid		$   (57,600)
	Cash outflow from financing activities		$   (27,248)
	Total Cash flow during the year		$    51,840
	Opening Balance		$    77,440
	Ending Balance		$ 129,280