Question

Weaver Company Comparative Balance Sheet at December 31
	This Year				Last Year
Assets
Cash and cash equivalents	$	16			$	12
Accounts receivable		296				230
Inventory		157				195
Prepaid expenses		9				6
Total current assets		478				443
Property, plant, and equipment		505				427
Less accumulated depreciation		(85	)			(71	)
Net property, plant, and equipment		420				356
Long-term investments		28				34
Total assets	$	926			$	833
Liabilities and Stockholders' Equity
Accounts payable	$	304			$	226
Accrued liabilities		70				78
Income taxes payable		71				64
Total current liabilities		445				368
Bonds payable		196				171
Total liabilities		641				539
Common stock		163				201
Retained earnings		122				93
Total stockholders’ equity		285				294
Total liabilities and stockholders' equity	$	926			$	833

Weaver Company Income Statement For This Year Ended December 31
Sales					$	752
Cost of goods sold						447
Gross margin						305
Selling and administrative expenses						219
Net operating income						86
Nonoperating items:
Gain on sale of investments	$	7
Loss on sale of equipment		(2	)			5
Income before taxes						91
Income taxes						24
Net income					$	67

During this year, Weaver sold some equipment for $18 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $6 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $38 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

Answer:

WEAVER COMPANY Statement of Cash Flow For current year ended December 31 A.Cash flow from operating activities: Net Income Adjustment for: Depreciation Income tax expense Gain on sale of investment Loss on sale of equipment Operating profit before working capital change Adjustment for: Increase in Account receivable Decrease in Inventory Increase in prepaid expense Decrease in accrued liabilities Increase in Account payable Cash generated from operation Less: Income tax paid Net Cash Flow from / (used in) operating activities B. Cash Flow From Investing Activities: Property, plant & Equipment purchased Sales of equipment Sales of LT investment Net Cash Flow from/ (used in) investing activities C. Cash Flow From Financing Activities: Issue of bonds Repurchase of own stock Dividend paid Net Cash Flow from / (used in) financing activities Net increase / (decrease) in cash and cash equivalents (A+B+C) Cash and cash equivalent at the beginning of the year Cash and cash equivalent at the end of the year $ 67,000 24,000 24,000 (7,000) 2,000 110,000 (66,000) 38,000 (3,000) (8,000) 78,000 149,000 17,000 132,000 (108,000) 18,000 13,000 (77,000) 25,000 (38,000) (38,000) (51,000) 4,000 12,000 16,000 $

Accumulated depreciation ending Bal. $ Add: Depreciation of equipment sold Less: Accumulated depreciation beginning Bal. Depreciation expense charged to Income statement $ 85,000 10,000 (71,000) 24,000 $ Income tax payable opening Bal. Add: Income tax expense to Income statement Less: Income tax payable ending Bal. Income tax paid 64,000 24,000 (71,000) 17,000 $ $ Property, plant & equipment ending Bal. Add: Cost of equipment sold Less: Property, Plant & equipment eginning Bal. Property, plant & equipment purchased 505,000 30,000 (427,000) 108,000 $ $ Retained earning beginning Bal. Add: Net income Less: retained earning ending Bal. Dividend paid 93,000 67,000 (122,000) 38,000 $