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# Statement of Cash Flows

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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.
Notes in the margin:
a. Cash from operations \$33,500

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#### Solution Preview

Please see the attached file.

(a) WELLER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2007

Cash flows from operating activities
Net income 32,000
Adjustments to reconcile net income
&#8194;&#8194;to net cash provided by operating
&#8194;&#8194;activities
Depreciation expense 14,500 Depreciation is non cash and so add back. Change in accumulated depreciation =5,000+add accumulated depreciation on equipment sold=9,500. Total ...

#### Solution Summary

The solution explains how to prepare a statement of cash flows using the indirect method for Weller Company

\$2.49