Prepare a statement of cash flows using the indirect method.


Question Description:

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Presented on the next page are the financial statements of Weller Company. WELLER COMPANY Comparative Balance Sheets December 31 WELLER COMPANY Comparative Balance Sheets December 31 WELLER COMPANY Comparative Balance Sheets December 31 Assets 2010 2009 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 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, 2010 WELLER COMPANY Income Statement For the Year Ended December 31, 2010 Sales $242,000 Cost of goods sold 175,000 Gross profit 67,000 Operating expenses 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, $14,500, is in the operating expenses. 4. All sales and purchases are on account. Instructions (a) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow.

Answer

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