Question

omparative financial statements for Weaver Company follow: Weaver Company Comparative Balance Sheet at December 31 This Year Last Year Assets Cash $ -4 $ 11 Accounts receivable 310 230 Inventory 156 195 Prepaid expenses 9 5 Total current assets 471 441 Property, plant, and equipment 516 437 Less accumulated depreciation (86 ) (72 ) Net property, plant, and equipment 430 365 Long-term investments 25 32 Total assets $ 926 $ 838 Liabilities and Stockholders' Equity Accounts payable $ 304 $ 225 Accrued liabilities 71 79 Income taxes payable 73 65 Total current liabilities 448 369 Bonds payable 196 172 Total liabilities 644 541 Common stock 161 201 Retained earnings 121 96 Total stockholders’ equity 282 297 Total liabilities and stockholders' equity $ 926 $ 838 Weaver Company Income Statement For This Year Ended December 31 Sales $ 753 Cost of goods sold 450 Gross margin 303 Selling and administrative expenses 218 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 $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 $7 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $40 of its own stock. This year Weaver did not retire any bonds. 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

Solution:

WEAVER COMPANY
Statement of cash flows- Indirect method (Partial)
Particulars	Amount ($)	Amount ($)
Cash flow from Operating Activities
Net Income		65
Adjustment to reconcile net income to net cash provided by operating activities
Gain on sale of equipment	(6)
Loss on sale of equipment	2
Depreciation(86+25-72)	39
Change in current operating assets and liabilities:
Increase in account receivable	(80)
Decrease in Inventory	39
Increase in Prepaid expense	(4)
Increase in accounts payable	79
Decrease in accrued liabilities	(8)
Increase in Income tax payable	8	69
Net cash flow from operating activities		134