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	$	11			$	12
Accounts receivable		291				229
Inventory		159				195
Prepaid expenses		9				5
Total current assets		470				441
Property, plant, and equipment		513				435
Less accumulated depreciation		(81	)			(71	)
Net property, plant, and equipment		432				364
Long-term investments		25				31
Total assets	$	927			$	836
Liabilities and Stockholders' Equity
Accounts payable	$	305			$	226
Accrued liabilities		73				80
Income taxes payable		73				64
Total current liabilities		451				370
Bonds payable		196				171
Total liabilities		647				541
Common stock		160				200
Retained earnings		120				95
Total stockholders’ equity		280				295
Total liabilities and stockholders' equity	$	927			$	836

Weaver Company Income Statement For This Year Ended December 31
Sales					$	753
Cost of goods sold						446
Gross margin						307
Selling and administrative expenses						223
Net operating income						84
Nonoperating items:
Gain on sale of investments	$	7
Loss on sale of equipment		(2	)			5
Income before taxes						89
Income taxes						24
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 $6 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $40 of its own stock. This year Weaver did not retire any bonds.

Answer 1

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$                  65
Adjustments
Depreciation	$                       20			=81-71+10
Gain on sale of investment	$                        -7
Loss on sale of equipment	$                         2
Increase in Accounts Receivable	$                     -62			=229-291
Decrease in Inventory	$                       36			=195-159
Increase in Prepaid Expenses	$                        -4			=5-9
Increase in Accounts payable	$                       79			=305-226
Decrease in Accrued Liabilities	$                        -7			=73-80
Increase in Income tax payable	$                         9			=73-64
Total Adjustments		$                  66
Net Cash from operating activities			$                131
Cash flow from Investing Activities
Sale of Equipment		$                  19
Sale of Investment		$                  13
Purchase of Equipment		$               -109		=435-31-513
Net Cash used in investing activities			$                 -77
Cash flow from Financing Activities
Purchase of Treasury Stock		$                 -40
Issue of Bonds Payable		$                  25		=196-171
Payment of cash dividends		$                 -40
Net Cash used in financing activities			$                 -55
Net Increase in cash			$                   -1
Beginning Balance of Cash			$                   12
Ending Balance of Cash			$                   11