Question

Comparative financial statements for Weaver Company follow Wcaver Comрапу Comparative Balance Sheet at December 31 This Year Last Year Assets $ 13 Cash 3 Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and cquipment Less accumulated depreciation Net property, plant, and equipnent Long-ters investments 318 228 160 196 6 481 443 510 430 (85 (72) 425 358 26 33 Tatal assets $932 $834 Liabilities and Stockholders Equity Accounts payable Accrued liabilities Income taxes payable 383 $226 72 77 73 63 Total current liabilities Bonds payable Total liabilitics 448 366 197 172 645 538 Cormon stock Retained earnings Total stockholders equity Total liabilities and stockholders equity 164 281 123 95 287 296 $ 932 $834 Исaver Comрапу Income Statement For This Year Ended December 31 Sales $751 Cost of goods sold Gross margin Selling and administrative expenses 448 303 228 Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Incore before taxes 83 87 Income taxes 22 $ 65 Net income 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 $13 that had cost $7 when purchased several years ago. Weaver paid a cosh dividend this year and the company repurchased $37 of its own stock. This year Weaver did not retire any bonds. Problem 14-7 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 negatlve amounts.) Weaver Company Statement of Cash Flows-Indirect Method (partlal)

Answer 1

1.

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income		$            65.00
Adjustments
Depreciation	$          23.00			=85-72+10
Gain on Sale of Investments	$          (6.00)
Loss on sale of Equipment	$            2.00
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable	$        (82.00)			=228-310
Decrease in inventory	$          36.00			=196-160
Increase in Prepaid Expenses	$          (2.00)			=6-8
Increase in Accounts Payable	$          77.00			=303-226
Increase in Income Tax Payable	$          10.00			=73-63
Decrease in Accrued Liabilities	$          (5.00)			=72-77
Total Adjustments		$            53.00
Cash from Operating Activities			$         118.00

Since Depreciation Charged is not given, it is calculated with back calculation
Loss on sale of equipment and Gain on sale of investment is part of Investing Activities

2.

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income		$            65.00
Adjustments
Depreciation	$          23.00			=85-72+10
Gain on Sale of Investments	$          (6.00)
Loss on sale of Equipment	$            2.00
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable	$        (82.00)			=228-310
Decrease in inventory	$          36.00			=196-160
Increase in Prepaid Expenses	$          (2.00)			=6-8
Increase in Accounts Payable	$          77.00			=303-226
Increase in Income Tax Payable	$          10.00			=73-63
Decrease in Accrued Liabilities	$          (5.00)			=72-77
Total Adjustments		$            53.00
Cash from Operating Activities			$         118.00
Cash flow from Investing Activities
Sale of Equipment		$            19.00
Sale of Long Term Investment		$            13.00
Purchase of Equipment		$       (111.00)		=430-31-510
Net cash used In investing activities			$         (79.00)
Cash flow from Financing Activities
Issue of Bonds		$            25.00		=197-172
Purchase of Shares		$         (37.00)		=164-201
Dividend Paid		$         (37.00)
Net cash used in financing activities			$         (49.00)
Increase in Cash			$         (10.00)
Opening Balance of Cash			$            13.00
Closing Balance of Cash			$              3.00

Since Plant and Equipment has increased from past year despite sale of equipment, which means that there was purchase of new equipment as well which is found out by back calculation
Common Stock is decreased from last year, so there may be buy back of common stock