Problem assignment week 6

P13-7

1

Net cash provided by (used in) operating activities:

Step 1: The following equation can be applied to the Accumulated Depreciation account to compute the depreciation to add back to net income:

Beginning balance Debits + Credits = Ending balance

$xxxx $xxxx + Credits = $93

Credits = $93 $xxxx + $xxxx Credits = $xxxx

Step 2: The guidelines from Exhibit 13-2 can be used to analyze the changes in noncash balance sheet accounts that impact net income as follows:

Increase inDecrease in

Account balanceAccount balance

Current Assets

Accounts receivable..............................-100

Inventory..............................................+50

Prepaid expenses.................................-4

Current Liabilities

Accounts payable.................................+80

Accrued liabilities................................-12

Income taxes payable...........................+6

Step 3

The gain on sale of investments ($7) is subtracted from net income and the loss on the sale of equipment ($4) is added to net income.

Operating activities

The net cash provided by (used in) operating activities is computed as follows:

Net income............................................................................$63

Adjustments to convert net income to cash basis:

Depreciation......................................................................$xxxx

Increase in accounts receivable ............................................(xxxx)

Decrease in inventory...........................................................xxxx

Increase in prepaid expenses ...............................................(xxxx)

Increase in accounts payable ................................................xxxx

Decrease in accrued liabilities ..............................................(xxxx)

Increase in income taxes payable .........................................xxxx

Gain on sale of investments .................................................(xxxx)

Loss on sale of equipment ....................................................xxxxxxxx

Net cash provided by (used in) operating activities .....................xxxx

2

Prepare a statement of cash flows.

Investing and financing activities:

Step 2: The guidelines from Exhibit 13-3 can be used to analyze the changes in noncash balance sheet accounts that impact investing and financing cashflows as follows:

Increase inDecrease in

Account balanceAccount balance

Noncurrent Assets

Property, plant, and equipment..............................-140

Long term investments..............................................+3

Liabilities and stockholders' Equity

Bonds payable.................................+110

Common stock................................-40

Hint:

The decrease in the long-term investments account ($3) equals the cost of the long-term investment sold; therefore, Weaver did not purchase any long-term investments during the year. The proceeds from the sale of a long-term investment ($10) should be recorded as a cash inflow in the investing activities section of the statement.

Because Weaver did not retire any bonds during the year, the corresponding amount in the table on the prior page (+110) represents the gross cash inflow pertaining to a bond issuance. The company repurchased $40 of its own stock, so the corresponding amount on the prior page is reported as a cash outflow in the financing activities section in the statement of cash flows. Property, plant, and equipment and retained earnings would require further analysis as follows

Property, plant, and equipment:

Beginning balance + Debits- Credits = Ending balance

$470 + Debits - $xxxx= $610

Debits = $610- $470+$xxxx

Debts= xxxxx

The additions to property, plant, and equipment ($your debits above) are recorded as a cash outflow and the proceeds from the sale of equipment ($20) are recorded as a cash inflow.

Retained earnings

Beginning balance - Debits + Credits + Ending balance

$74- Debits + $xxxx= $107

$xxxx=$107+ Debits

Debits+ $xxxx

The dividend payment (Debits above $xxx) should be recorded as a cash outflow in the financing activities section of the statement.

Weaver Company FULL and complete statement of cash flows:

Operating activities

The net cash provided by (used in) operating activities is computed as follows:

Net income............................................................................$63

Adjustments to convert net income to cash basis:

Depreciation......................................................................$xxxx

Increase in accounts receivable ............................................(xxxx)

Decrease in inventory...........................................................xxxx

Increase in prepaid expenses ...............................................(xxxx)

Increase in accounts payable ................................................xxxx

Decrease in accrued liabilities ..............................................(xxxx)

Increase in income taxes payable .........................................xxxx

Gain on sale of investments .................................................(xxxx)

Loss on sale of equipment ....................................................xxxxxxxx

Net cash provided by (used in) operating activities .....................xxxx

Investing activities:

Proceeds from sale of long-term investments.................................xxxx

Proceeds from sale of equipment ...................................................xxxx

Additions to property, plant, & equipment .....................................(xxxx)

Net cash provided by (used in) investing activities ..........................(xxxx)

Finance activities:

Issuance of bonds payable..............................................................xxxx

Repurchase of common stock......................................................... (xxxx)

Cash dividends paid........................................................................(xxxx)

Net cash provided by (used in) investing activities.......................xxxx

Net decrease in cash and cash equivalents................................(xxxx)

Beginning cash and cash equivalents.........................................xxxx

Ending cash and cash equivalents..............................................$xxxx