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	$	21			$	12
Accounts receivable		295				231
Inventory		157				195
Prepaid expenses		9				5
Total current assets		482				443
Property, plant, and equipment		511				432
Less accumulated depreciation		(81	)			(71	)
Net property, plant, and equipment		430				361
Long-term investments		27				34
Total assets	$	939			$	838
Liabilities and Stockholders' Equity
Accounts payable	$	305			$	224
Accrued liabilities		72				79
Income taxes payable		73				65
Total current liabilities		450				368
Bonds payable		200				172
Total liabilities		650				540
Common stock		165				202
Retained earnings		124				96
Total stockholders’ equity		289				298
Total liabilities and stockholders' equity	$	939			$	838

Weaver Company Income Statement For This Year Ended December 31
Sales					$	751
Cost of goods sold						445
Gross margin						306
Selling and administrative expenses						223
Net operating income						83
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(2	)			4
Income before taxes						87
Income taxes						22
Net income					$	65

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 $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.

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

Answer 1

Statement of Cash Flows - Indirect Approach
	Amount in $	Amount in $
Net income		$                      65
Cash flows from operating activities
Adjustments for reconcile the net income to:
Gain on sale of land
Depreciation Expenses	$                      20
Gain on sale of investment	$                      -6
Loss on sale of Equipment	$                        2
Increase in account receivable	$                    -64
Decrease in inventory	$                      38
Increase in Prepaid Rent	$                      -4
Increase on account payable	$                      81
Decrease in accrued liabilities	$                      -7
Increase in income tax payable	$                        8
		$                      68
Net cash from operating activities		$                   133
Cash flows from investing activities
Purchase of Property,plant & Equipment	$                  -110
Sale of long term investment	$                      13
Sale of Equipment	$                      19
Net cash used in investing activities		$                    -78
Cash flows from Financing activities
Dividend Paid	$                    -37
Purhcase of Common Stock	$                    -37
Issue of Bonds Payable	$                      28
Net cash used in financing activities		$                    -46
Net increase in cash and cash equivalents		$                        9
Add :Cash and cash equivalents at beginning of period		$                      12
Cash and cash equivalents at end of period		$                      21