Question

Required information

Problem 13-7 Prepare a Statement of Cash Flows [LO13-1, LO13-2]

[The following information applies to the questions displayed below.]

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash and cash equivalents	$	18			$	12
Accounts receivable		297				229
Inventory		158				196
Prepaid expenses		8				6
Total current assets		481				443
Property, plant, and equipment		507				429
Less accumulated depreciation		(85	)			(70	)
Net property, plant, and equipment		422				359
Long-term investments		26				32
Total assets	$	929			$	834
Liabilities and Stockholders' Equity
Accounts payable	$	302			$	225
Accrued liabilities		72				78
Income taxes payable		74				64
Total current liabilities		448				367
Bonds payable		198				171
Total liabilities		646				538
Common stock		162				201
Retained earnings		121				95
Total stockholders’ equity		283				296
Total liabilities and stockholders' equity	$	929			$	834

Weaver Company Income Statement For This Year Ended December 31
Sales					$	754
Cost of goods sold						446
Gross margin						308
Selling and administrative expenses						223
Net operating income						85
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(2	)			4
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 $12 that had cost $6 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.

Problem 13-7 Part 1

Required:

1. Using the indirect method, determine the net cash provided by/used in operating activities for this year. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1

65 Weaver Company Statement of Cash flows - Indirect Method (Partial) Cash flows from Operating Activities: Net Income Adjustments to reconcile net income to net cash Basis Depreciation expenses Gain on Sale of investments loss on sale of equipment Increase in accounts receivables Decrease in Inventory Increase in Prepaid Expenses Increases in Accounts Payable Decreases in accured Liabilities Increases in Income Taxes payable Net Cash provided by operating activities 10 S S 70 135

135 19 S $ (109) Weaver Company Statement of Cash flows For This Year Ended December 31 Operating Activities: Net Cash provided by operating activities Investing Activities Sale of Equipment Sale of investments Purchase of property, plant and equipment Net Cash Used by Investing activities Financing Activities Issuannce of Bonds payable Cash Dividends paid Purchase of Common stock Net Cash provided by Financing activities Increased In Cash Beginning Cash and Cash equivalents Ending Cash and Cash equivalents 27 (39) S (51) 12 18

Notes: Purchase of plant and Equipment Closing Balance of plant and Equipment Less: net of opening balance of Plant and Equipment(429-31) Purchase of plant and Equipment S S $ 507 398 109 Dividends paid Opening balance of Retained Earnings Add: Net Income 95 65 160 121 39 Less: Closing Balance of Retained earnings Dividends Paid S