Question

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash	$	-7			$	11
Accounts receivable		310				230
Inventory		156				194
Prepaid expenses		9				5
Total current assets		468				440
Property, plant, and equipment		510				431
Less accumulated depreciation		(85	)			(70	)
Net property, plant, and equipment		425				361
Long-term investments		28				35
Total assets	$	921			$	836
Liabilities and Stockholders' Equity
Accounts payable	$	304			$	226
Accrued liabilities		72				80
Income taxes payable		74				64
Total current liabilities		450				370
Bonds payable		199				170
Total liabilities		649				540
Common stock		160				202
Retained earnings		112				94
Total stockholders’ equity		272				296
Total liabilities and stockholders' equity	$	921			$	836

Weaver Company Income Statement For This Year Ended December 31
Sales					$	750
Cost of goods sold						447
Gross margin						303
Selling and administrative expenses						222
Net operating income						81
Nonoperating items:
Gain on sale of investments	$	5
Loss on sale of equipment		(1	)			4
Income before taxes						85
Income taxes						25
Net income					$	60

During this year, Weaver sold some equipment for $19 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $12 that had cost $7 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $42 of its own stock. This year Weaver did not retire any bonds.

2. Using the information in (1) above, 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

Weaver Company
Cash Flow Statement
For the year ended December 31
A. Cash Flows from Operating Activity
Net Income		$         60.00
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense	$      25.00
Loss on sale of Equipment	$        1.00
Gain on sale of Investment	$      (5.00)
Change in Current operating Assets and Liabilities
Increase in Accounts receivables	$    (80.00)
Decrease in inventory	$      38.00
Increase in prepaid expense	$      (4.00)
Increase in Accounts payable	$      78.00
Decrease in Accrues Liabilities	$      (8.00)
Increase in income tax payable	$      10.00
		$         55.00
Net cash flow from Operating activities		$       115.00
B. Cash flows from Investing Activities
Sale of equipment	$      19.00
Purchase of equipment	$ (109.00)
Sale of Investment	$      12.00
Net cash used in Investing activities		$       (78.00)
C. Cash Flows from Financing activities
Proceeds from issue of Bonds	$      29.00
Purchase of own stock	$    (42.00)
Payment of Dividend	$    (42.00)
Net cash used in Financing Activities		$       (55.00)
Net Increase (Decrease) in Cash [A+B+C]		$       (18.00)
Cash at the beginning of the period		$         11.00
Cash at the end of the period		$         (7.00)