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	$	10		$	20
Accounts receivable		590			370
Inventory		170			235
Prepaid expenses		9			7
Total current assets		779			632
Property, plant, and equipment		680			570
Less accumulated depreciation		75			60
Net property, plant, and equipment		605			510
Long-term investments		2			47
Total assets	$	1,386		$	1,189
Liabilities and Stockholders' Equity
Accounts payable	$	390		$	285
Accrued liabilities		35			50
Income taxes payable		84			77
Total current liabilities		509			412
Bonds payable		370			270
Total liabilities		879			682
Common stock		346			450
Retained earnings		161			57
Total stockholders’ equity		507			507
Total liabilities and stockholders' equity	$	1,386		$	1,189

Weaver Company Income Statement For This Year Ended December 31
Sales					$	870
Cost of goods sold						485
Gross margin						385
Selling and administrative expenses						207
Net operating income						178
Nonoperating items:
Gain on sale of investments	$	3
Loss on sale of equipment		(1	)			2
Income before taxes						180
Income taxes						54
Net income					$	126

During this year, Weaver sold some equipment for $18 that had cost $48 and on which there was accumulated depreciation of $29. In addition, the company sold long-term investments for $48 that had cost $45 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $104 of its own stock. This year Weaver did not retire any bonds.

Required:

1. Using the direct method, adjust the company’s income statement for this year to a cash basis.

2. Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Using the direct method, adjust the company’s income statement for this year to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

	Weaver Company Direct Method of Determining the Net Cash Flows from Operating Activities Adjustments to a cash basis: Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis:

• Required 1
• Required 2

• Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

• Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.)

  	Weaver Company Statement of Cash Flows For This Year Ended December 31 Operating activities: Cash received from customers Less cash disbursements for: Total cash disbursements Investing activities: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents

• Required 1
• Required 2

Answer 1

Cash Flow Statement
Direct Method
Cash Flow from Operating Activities
Cash Collected from Customers		$             650.00		=870+370-590
Cash paid for inventory		$            -315.00		=-(485+285-390+170-235)
Cash paid for Selling and administrative expenses		$            -180.00		=-(207+50-35+9-7)+44
Cash paid for Income tax		$              -47.00		=-(54+77-84)
Cash from Operating Activities			$             108.00

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income		$             126.00
Adjustments
Depreciation	$           44.00			=75-(60-29)
Gain on sale of Investment	$            -3.00
Loss on sale of Equipment	$              1.00
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable	$       -220.00			=370-590
Decrease in Inventory	$           65.00			=235-170
Inrease in prepaid expenses	$            -2.00			=7-9
Increase in Accounts Payable	$         105.00			=390-285
Decrease in Accrued Liabilities	$          -15.00			=35-50
Increase in Income Tax Payable	$              7.00			=84-77
Total Adjustments		$              -18.00
Cash from Operating Activities			$             108.00
Cash flow from Investing Activities
Sale of Investments		$                48.00
Sale of Equipment		$                18.00
Purchase of Equipment		$            -158.00		=570-48-680
Net cash used In investing activities			$             -92.00
Cash flow from Financing Activities
Repurchase of Common Stock		$            -104.00		=346-450
Issue of Bonds		$             100.00		=370-270
Dividend Paid		$              -22.00		=-(57+126-161)
Net cash used in financing activities			$             -26.00
Increase in Cash			$             -10.00
Opening Balance of Cash			$               20.00
Closing Balance of Cash			$               10.00