The 2014 and 2013 balance sheets of Watson Corporation follow. The 2014 income statement is also provided. Watson had no noncash investing and financing transactions during 2014. During the year, the company sold equipment for $ 15,600, which had originally cost $ 13,200 and had a book value of $ 11,400. The company did not issue any notes payable during the year but did issue common stock for $ 32,000.

Requirements
1. Prepare the statement of cash flows for Watson Corporation for 2014 using the indirect method.

2. Evaluate the company€™s cash flows for the year. Discuss each of the categories of cash flows in your response.

Transcribed Image Text:

Watson Corporation Comparative Balance Sheets December 31, 2014 and 2013 Assets 2014 2013 5 Current assets: 6 Cash 7 Accounts receivable 8 Inventory 9 Prepaid insurance 10 Total current assets $ 48,500 31,800 86,200 $19,000 29,700 93,300 3,200 169 700 S 2,800 144,800 158,000138,000 (27,700 12 Property. plant, and equipment Less: Accumulated (30 100) 110,000 14 Investments 15 Total assets 16 $ 407,600 255,100 17 Curent labilitiesLlabilities $33,100 19 Accounts payable 20 Wages payable 21 Interest payable 22 Income taxes payable 23 Other accrued expenses payable 24 Total current liabilities 25 26 Long-term liabilities 27 Total liabilities 28 29 30 Common stock 31 Retained earnings 32 Total stockholders equity 7500 1,900 6,000 18700 62 200 S 66,300 141300 114,000 180,300 Stockholders' equity 105,000 73,000 266300 74,800 $407,600 255,100 34 Total liabilities and equity 35