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    Statement of cash flows (indirect method) - Weller Company

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    Presented below are the financial statements of Weller Company.
    WELLER COMPANY
    Comparative Balance Sheets
    December 31
    Assets 2007 2006
    Cash $35,000 $20,000
    Accounts receivable 33,000 14,000
    Merchandise inventory 27,000 20,000
    Property, plant, and equipment 60,000 78,000
    Accumulated depreciation (29,000) (24,000)
    Total $126,000 $108,000

    Liabilities and Stockholders' Equity
    Accounts payable $29,000 $15,000
    Income taxes payable 7,000 8,000
    Bonds payable 27,000 33,000
    Common stock 18,000 14,000
    Retained earnings 45,000 38,000
    Total $126,000 $108,000

    WELLER COMPANY
    Income Statement
    For the Year Ended December 31, 2007
    Sales $242,000
    Cost of goods sold 175,000
    Gross profit 67,000
    Selling expenses $18,000
    Administrative expenses 6,000 24,000
    Income from operations 43,000
    Interest expense 3,000
    Income before income taxes 40,000
    Income tax expense 8,000
    Net income $32,000

    Additional data:
    1. Dividends declared and paid were $25,000
    2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
    3. All depreciation expense is in the selling expense category.
    4. All sales and purchases are on account.
    Instructions:
    a. Prepare a statement of cash flows using the indirect method.
    b. Compute these cash-basis measures:
    1. Current cash debt coverage ratio.
    2. Cash debt coverage ratio.
    3. Free cash flow.

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    Presented below are the financial statements of Weller Company.
    WELLER COMPANY
    Comparative Balance Sheets
    31-Dec
    Assets 2007 2006
    Cash $35,000 $20,000
    Accounts receivable 33,000 14,000
    Merchandise inventory 27,000 20,000
    Property, plant, and equipment 60,000 78,000
    Accumulated depreciation -29,000 -24,000
    Total $126,000 $108,000

    Liabilities and Stockholders' Equity
    Accounts payable $29,000 $15,000
    Income taxes payable 7,000 8,000
    Bonds payable 27,000 33,000
    Common stock 18,000 14,000
    Retained earnings 45,000 38,000
    Total $126,000 $108,000

    WELLER COMPANY
    Income Statement
    For the Year Ended December 31, 2007
    Sales $242,000
    Cost of goods sold 175,000
    Gross profit 67,000
    Selling expenses $18,000
    Administrative expenses 6,000 24,000
    Income from operations 43,000
    Interest expense 3,000
    Income before income taxes 40,000
    Income tax expense 8,000
    Net income $32,000

    Additional data:
    1. Dividends declared and paid were $25,000
    2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
    3. All depreciation expense is in the selling expense category.
    4. All sales and purchases are on account.
    Instructions:
    a. Prepare a statement of cash flows using the indirect method.
    b. Compute these cash-basis measures:
    1. Current cash debt coverage ...

    Solution Summary

    Prepares a statement of cash flows using the indirect method and computes three cash-basis measures: 1. Current cash debt coverage ratio. 2. Cash debt coverage ratio. 3. Free cash flow.

    $2.19

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