Question

Statement of Cash Flows (Indirect Method) The Wolff Company's income statement and comparative balance sheets at December 31 of 2016 and 2015 are shown below: ce WOLFF COMPANY Income Statement For the Year Ended December 31, 2016 Sales Revenue $645,000 Cost of Goods Sold $430,000 Wages Expense 86,000 Insurance Expense 12,000 Depreciation Expense 13,000 Interest Expense 12,000 Income Tax Expense 29,000 582,000 Net Income $63,000

Answer 1

calculation of change in cash	amount in $
ending cash balance	52000
beginning cash balance	8000
net change in cash	44000
Wolff Company
Statement of cash flows
For the year ended Dec. 31, 2016 (amount in $)
cash flow from operating activities
net income	63000
add:depreciation	13000
less: increase in accounts receivable	-9000
less: increase in inventory	-30000
add: decrease in prepaid insurance	2000
less: decrease in accounts payable	-3000
add: increase wages payable	3000
less: decrease in income tax payable	-1000
cash flow provided from operating activities		38000
cash flow from investing activities
purchase of plant assets	-24000
cash flow provided from investing activities		-24000
cash flow from financing activities
issuance of bonds	66000
payment of dividends	-36000
cash flow provided from financing activities		30000
net change in cash		44000
cash at the beginning of the year		8000
cash at the end of the year		52000
calculation of free cash flow	amount in $
net income	63000
add: non-cash expense - depreciation	13000
less: net working capital (current assets - current liabilities)	-82000
less: capital expenditure	-24000
total free cash flow	-30000
calculation of net change in working capital	amount in $
current assets:
cash	52000	8000
accounts receivable	41000	32000
inventory	90000	60000
prepaid insurance	5000	7000
total current assets	188000	107000
current liabilities:
accounts payable	7000	10000
wages payable	9000	6000
income tax payable	6000	7000
total current liabilities	22000	23000
working capital	166000	84000
net change in working capital	82000
operating cash flow to current liabilities ratio	cash flow from operations / current liabilities
cash flow provided from operating activities	38000
total current liabilities	22000
ratio	1.73
operating cash flow to capital expenditure ratio	(cash flow operations - dividends paid) / cash paid for acquisition
cash flow provided from operating activities	38000
dividends paid	36000
cash paid for acquisition	24000
ratio	0.08