Question

Required Information Problem 14.7 Prepare a Statement of Cash Flows (LO14-1, LO14-2] [The following information applies to the questions displayed below.) Comparative financial statements for Weaver Company follow. Weaver Company Comparative Balance Sheet at December 31 3834 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Long-tere investments Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Weaver Company Income Statement For This Year Ended December 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income 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 $39 of its own stock. This year Weaver did not retire any bonds.

Answer 1

Weaver Company Cash Flow Statement for the Year Ending 31st Dec,20xx Indirect Method Particulars A. Cash Flows From Operating Activities Net Income for the year Add:Provision for tax Income before tax (Amount in $) (6) 93 1 Adjustments to Reconcile Net Income:- 2 Add : Depreciation for the year {$ 85 - $ 71} 3 Add: Loss on sale of Equipments 4 Less: Gain on sale of Investments 5 Operating Profit before working capital changes 5 Changes in Working Capital :- 7 Decrease in Inventory 3 Increase in Account Receivable Increase in Prepaid expenses Increase in Account Payable 1 Decrease in Accrued Liabilities 2 Total 39 (77) (4) 76 (7) 120 4 Less : Income tax paid (w note 1) 5 Net Cash Flow From Operating Activities (A) (16) 104 VU

(99) 3 B. Cash Flows From Investing Activities 4 Purchase of plant & equipment ( W note 3) 5 Sale of Equipment 6 Sale of Investments [Long term] 7 Net Cash Flow From Investing Activities (B) 18 13 (68) 9 C. Cash Flows From Financing Activities -0 Purchase of own stock -1 Cash received from issue of bonds -2 Cash Dividends Paid (Working Note 2) 3 Net Cash Flow From Financing Activities (C) (39) 26 (39) (52) -5 Net Increase (Decrease) in cash (A+B+C) -6 Cash Balance at the beginning of the year -7 Cash Balance at the end of the year

23 88 (72) 16 60 61 Working Note 1 62 Calculation of Income Tax Paid 63 Income Tax Payable (Beginning Balance) 64 Add : Provision for Income Tax 65 Total 66 Less : Income Tax Payable (Ending Balance) 67 Income Tax Paid During the Year 68 69 Working Note 2 70 Calculation of Dividend Paid 71 72 Retained Earnings (Beginning Balance) 73 Add: Net Income 74 Total 75 Less : Retained Earnings (Ending Balance) 76 Dividend Paid During the Year 77 94 59 153 (114) 39

3 Working Note 3 Calculation of Purchase of plant & equipment 428 (21) 1 Net Property Plant and Equipment (Beginning Balance) 2 Less : Sale of Equipment (Cost $31 - Acc. Dep $10] Total Less Net Property Plant and Equipment (Ending Balance) 5 Purchase of Plant & Equipment During the Year 407 (506) 99)