Comparative financial statements for Weaver Company follow: During this year, Weaver sold some equipment for $10 that had cost $49 and on which there was accumulated depreciation of $30. In addition, the company sold long-term investments for $50 that had cost $38 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $109 of its own stock. This year Weaver did not retire any bonds. Required: 1. Using the direct method, adjust the company’s income statement for this year to a cash basis. 2. Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year.

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Chapter1: Financial Statements And Business Decisions
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Comparative financial statements for Weaver Company follow:

During this year, Weaver sold some equipment for $10 that had cost $49 and on which there was
accumulated depreciation of $30. In addition, the company sold long-term investments for $50 that
had cost $38 when purchased several years ago. Weaver paid a cash dividend this year and the
company repurchased $109 of its own stock. This year Weaver did not retire any bonds.

Required:
1. Using the direct method, adjust the company’s income statement for this year to a cash basis.
2. Using the information obtained in (1) above, along with an analysis of the remaining balance sheet
accounts, prepare a statement of cash flows for this year.

# Weaver Company Comparative Balance Sheet at December 31

## Assets

**This Year | Last Year**

- **Cash:** $9 | $21
- **Accounts Receivable:** $610 | $380
- **Inventory:** $175 | $240
- **Prepaid Expenses:** $10 | $8
- **Total Current Assets:** $804 | $649

**Property, Plant, and Equipment**
- **Property, Plant, and Equipment:** $690 | $580
- **Less Accumulated Depreciation:** $80 | $70
- **Net Property, Plant, and Equipment:** $610 | $510

- **Long-term Investments:** $10 | $48
- **Total Assets:** $1,424 | $1,207

## Liabilities and Stockholders' Equity

**This Year | Last Year**

- **Accounts Payable:** $400 | $290
- **Accrued Liabilities:** $50 | $60
- **Income Taxes Payable:** $85 | $78

- **Total Current Liabilities:** $535 | $428
- **Bonds Payable:** $390 | $280

- **Total Liabilities:** $925 | $708

**Stockholders' Equity**
- **Common Stock:** $341 | $450
- **Retained Earnings:** $158 | $49
- **Total Stockholders' Equity:** $499 | $499

- **Total Liabilities and Stockholders' Equity:** $1,424 | $1,207

### Notes:
- The balance sheet compares financial data from this year to last year, displaying changes in assets, liabilities, and equity.
- **Assets:** Reflects a small decrease in cash but significant increases in accounts receivable and property, plant, and equipment.
- **Liabilities:** Display growth, particularly in accounts payable and bonds payable.
- **Stockholders' Equity:** Remains constant overall, with a notable decrease in common stock countered by an increase in retained earnings.
Transcribed Image Text:# Weaver Company Comparative Balance Sheet at December 31 ## Assets **This Year | Last Year** - **Cash:** $9 | $21 - **Accounts Receivable:** $610 | $380 - **Inventory:** $175 | $240 - **Prepaid Expenses:** $10 | $8 - **Total Current Assets:** $804 | $649 **Property, Plant, and Equipment** - **Property, Plant, and Equipment:** $690 | $580 - **Less Accumulated Depreciation:** $80 | $70 - **Net Property, Plant, and Equipment:** $610 | $510 - **Long-term Investments:** $10 | $48 - **Total Assets:** $1,424 | $1,207 ## Liabilities and Stockholders' Equity **This Year | Last Year** - **Accounts Payable:** $400 | $290 - **Accrued Liabilities:** $50 | $60 - **Income Taxes Payable:** $85 | $78 - **Total Current Liabilities:** $535 | $428 - **Bonds Payable:** $390 | $280 - **Total Liabilities:** $925 | $708 **Stockholders' Equity** - **Common Stock:** $341 | $450 - **Retained Earnings:** $158 | $49 - **Total Stockholders' Equity:** $499 | $499 - **Total Liabilities and Stockholders' Equity:** $1,424 | $1,207 ### Notes: - The balance sheet compares financial data from this year to last year, displaying changes in assets, liabilities, and equity. - **Assets:** Reflects a small decrease in cash but significant increases in accounts receivable and property, plant, and equipment. - **Liabilities:** Display growth, particularly in accounts payable and bonds payable. - **Stockholders' Equity:** Remains constant overall, with a notable decrease in common stock countered by an increase in retained earnings.
**Weaver Company Income Statement**  
*For the Year Ended December 31*

- **Sales:** $880
- **Cost of Goods Sold:** $490
- **Gross Margin:** $390

- **Selling and Administrative Expenses:** $203

- **Net Operating Income:** $187

- **Nonoperating Items:**
  - *Gain on Sale of Investments:* $12
  - *Loss on Sale of Equipment:* $(9)

- **Income Before Taxes:** $190

- **Income Taxes:** $57

- **Net Income:** $133

**Explanation:**

This income statement provides a financial summary for Weaver Company, indicating revenue and expenses for the year ending December 31. 

- **Gross Margin** is calculated as Sales minus the Cost of Goods Sold (COGS), which shows the profit after covering production costs. 
- **Net Operating Income** reflects the profit from core business activities, subtracting Selling and Administrative Expenses from Gross Margin.
- **Nonoperating Items** include gains and losses from activities not related to primary operations, such as investments and equipment sales.
- **Income Before Taxes** is the sum of Net Operating Income and Nonoperating Items. 
- **Net Income** is derived after deducting Income Taxes from Income Before Taxes, representing the company's profit for the year.
Transcribed Image Text:**Weaver Company Income Statement** *For the Year Ended December 31* - **Sales:** $880 - **Cost of Goods Sold:** $490 - **Gross Margin:** $390 - **Selling and Administrative Expenses:** $203 - **Net Operating Income:** $187 - **Nonoperating Items:** - *Gain on Sale of Investments:* $12 - *Loss on Sale of Equipment:* $(9) - **Income Before Taxes:** $190 - **Income Taxes:** $57 - **Net Income:** $133 **Explanation:** This income statement provides a financial summary for Weaver Company, indicating revenue and expenses for the year ending December 31. - **Gross Margin** is calculated as Sales minus the Cost of Goods Sold (COGS), which shows the profit after covering production costs. - **Net Operating Income** reflects the profit from core business activities, subtracting Selling and Administrative Expenses from Gross Margin. - **Nonoperating Items** include gains and losses from activities not related to primary operations, such as investments and equipment sales. - **Income Before Taxes** is the sum of Net Operating Income and Nonoperating Items. - **Net Income** is derived after deducting Income Taxes from Income Before Taxes, representing the company's profit for the year.
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