Statement of Cash Flows (Direct Method) The Wolff Companys income statement and comparative balance sheets at December
Question:
Statement of Cash Flows (Direct Method) The Wolff Company’s income statement and comparative balance sheets at December 31 of 2016 and 2015 are shown below:
WOLFF COMPANY Income Statement For the Year Ended December 31, 2016 | ||
---|---|---|
Sales Revenue | $645,000 | |
Cost of Goods Sold | $430,000 | |
Wages Expense | 86,000 | |
Insurance Expense | 12,000 | |
Depreciation Expense | 13,000 | |
Interest Expense | 12,000 | |
Income Tax Expense | 29,000 | 582,000 |
Net Income | $63,000 |
WOLFF COMPANY Balance Sheets | ||
---|---|---|
Dec. 31, 2016 | Dec. 31, 2015 | |
Assets | ||
Cash | $52,000 | $8,000 |
Accounts Receivable | 41,000 | 32,000 |
Inventory | 90,000 | 60,000 |
Prepaid Insurance | 5,000 | 7,000 |
Plant Assets | 219,000 | 195,000 |
Accumulated Depreciation | (68,000) | (55,000) |
Total Assets | $339,000 | $247,000 |
Liabilities and Stockholders’ Equity | ||
Accounts Payable | $7,000 | $10,000 |
Wages Payable | 9,000 | 6,000 |
Income Tax Payable | 6,000 | 7,000 |
Bonds Payable | 141,000 | 75,000 |
Common Stock | 90,000 | 90,000 |
Retained Earnings | 86,000 | 59,000 |
Total Liabilities and Stockholders’ Equity | $339,000 | $247,000 |
Cash dividends of $36,000 were declared and paid during 2016. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi‑annually on June 30 and December 31. Accounts payable related to merchandise purchases.
Required
a. Calculate the change in cash that occurred during 2016.
b. Prepare a statement of cash flows using the direct method.
c. Compute free cash flow.
d. Compute the operating‑cash‑flow‑to‑current‑liabilities ratio. Round to two decimal points.
e. Compute the operating‑cash‑flow‑to‑capital‑expenditures ratio. Round to two decimal points.
a. Change in Cash during 2016 $Answer Answer Increase Decrease