Statement of Cash Flows (Indirect Method) The Wolff Company's income statement and comparative balance sheets at December 31 of the current year and the previous year are shown below: WOLFF COMPANY Income Statement For the Year Ended December 31 Sales Revenue $825,500 Cost of Goods Sold $559,000 Wages Expense 111,800 Insurance Expense 10,400 Depreciation Expense 22,100 Interest Expense 11,700 Income Tax Expense 37,700 752,700 Net Income $72,800 WOLFF COMPANY Balance Sheets Dec. 31, Current Year Dec. 31, Previous Year Assets Cash $14,300 $6,500 Accounts Receivable 53,300 41,600 Inventory 117,000 78,000 Prepaid Insurance 6,500 9,100 Plant Assets 325,000 253,500 Accumulated Depreciation (88,400) (66,300) Total Assets $427,700 $322,400 Liabilities and Stockholders' Equity Accounts Payable $9,100 $13,000 Wages Payable 11,700 7,800 Income Tax Payable 9,100 10,400 Bonds Payable 169,000 97,500 Common Stock 117,000 117,000 Retained Earnings 111,800 76,700 Total Liabilities and Stockholders' Equity $427,700 $322,400 Cash dividends of $37,700 were declared and paid during the current year. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi-annually on June 30 and December 31. Accounts payable relate to merchandise purchases. Required a. Calculate the change in cash that occurred during the current year. b. Prepare a statement of cash flows using the indirect method. c. Compute free cash flow. d. Compute the operating-cash-flow-to-current-liabilities ratio. e. Compute the operating-cash-flow-to-capital-expenditures ratio. a. Change in Cash during the current year $Answer Answer b. Use a negative sign with cash outflow answers. WOLFF COMPANY Statement of Cash Flows For Year Ended December 31 Cash Flow from Operating Activities Net Income Answer Add (deduct) items to convert net income to cash basis Depreciation Answer Accounts Receivable Answer Answer Inventory Answer Answer Prepaid Insurance Answer Answer Accounts Payable Answer Answer Wages Payable Answer Answer Income Tax Payable Answer Answer Cash Flow Provided by Operating Activities Answer Cash Flow from Investing Activities Purchase of Plant Assets Answer Cash Flow from Financing Activities Issuance of Bonds Payable Answer Payment of Dividends Answer Cash Provided by Financing Activities Answer Net Change in Cash Answer Cash at Beginning of Year Answer Cash at End of Year Answer c. Free cash flow $Answer d. Operating-cash-flow-to-current-liabilities ratio. Round answer to two decimal places. Answer e. Operating-cash-flow-to-capital-expenditures ratio.

Statement of Cash Flows (Indirect Method) The Wolff Company's income statement and comparative balance sheets at December 31 of the current year and the previous year are shown below: WOLFF COMPANY Income Statement For the Year Ended December 31 Sales Revenue $825,500 Cost of Goods Sold $559,000 Wages Expense 111,800 Insurance Expense 10,400 Depreciation Expense 22,100 Interest Expense 11,700 Income Tax Expense 37,700 752,700 Net Income $72,800 WOLFF COMPANY Balance Sheets Dec. 31, Current Year Dec. 31, Previous Year Assets Cash $14,300 $6,500 Accounts Receivable 53,300 41,600 Inventory 117,000 78,000 Prepaid Insurance 6,500 9,100 Plant Assets 325,000 253,500 Accumulated Depreciation (88,400) (66,300) Total Assets $427,700 $322,400 Liabilities and Stockholders' Equity Accounts Payable $9,100 $13,000 Wages Payable 11,700 7,800 Income Tax Payable 9,100 10,400 Bonds Payable 169,000 97,500 Common Stock 117,000 117,000 Retained Earnings 111,800 76,700 Total Liabilities and Stockholders' Equity $427,700 $322,400 Cash dividends of $37,700 were declared and paid during the current year. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi-annually on June 30 and December 31. Accounts payable relate to merchandise purchases. Required a. Calculate the change in cash that occurred during the current year. b. Prepare a statement of cash flows using the indirect method. c. Compute free cash flow. d. Compute the operating-cash-flow-to-current-liabilities ratio. e. Compute the operating-cash-flow-to-capital-expenditures ratio. a. Change in Cash during the current year $Answer Answer b. Use a negative sign with cash outflow answers. WOLFF COMPANY Statement of Cash Flows For Year Ended December 31 Cash Flow from Operating Activities Net Income Answer Add (deduct) items to convert net income to cash basis Depreciation Answer Accounts Receivable Answer Answer Inventory Answer Answer Prepaid Insurance Answer Answer Accounts Payable Answer Answer Wages Payable Answer Answer Income Tax Payable Answer Answer Cash Flow Provided by Operating Activities Answer Cash Flow from Investing Activities Purchase of Plant Assets Answer Cash Flow from Financing Activities Issuance of Bonds Payable Answer Payment of Dividends Answer Cash Provided by Financing Activities Answer Net Change in Cash Answer Cash at Beginning of Year Answer Cash at End of Year Answer c. Free cash flow $Answer d. Operating-cash-flow-to-current-liabilities ratio. Round answer to two decimal places. Answer e. Operating-cash-flow-to-capital-expenditures ratio.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Statement of Cash Flows (Indirect Method)
The Wolff Company's income statement and comparative balance sheets at December 31 of the current year and the previous year are shown below:

WOLFF COMPANY Income Statement For the Year Ended December 31
Sales Revenue		$825,500
Cost of Goods Sold	$559,000
Wages Expense	111,800
Insurance Expense	10,400
Depreciation Expense	22,100
Interest Expense	11,700
Income Tax Expense	37,700	752,700
Net Income		$72,800

WOLFF COMPANY Balance Sheets
	Dec. 31, Current Year	Dec. 31, Previous Year
Assets
Cash	$14,300	$6,500
Accounts Receivable	53,300	41,600
Inventory	117,000	78,000
Prepaid Insurance	6,500	9,100
Plant Assets	325,000	253,500
Accumulated Depreciation	(88,400)	(66,300)
Total Assets	$427,700	$322,400
Liabilities and Stockholders' Equity
Accounts Payable	$9,100	$13,000
Wages Payable	11,700	7,800
Income Tax Payable	9,100	10,400
Bonds Payable	169,000	97,500
Common Stock	117,000	117,000
Retained Earnings	111,800	76,700
Total Liabilities and Stockholders' Equity	$427,700	$322,400

Cash dividends of $37,700 were declared and paid during the current year. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi-annually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during the current year.
b. Prepare a statement of cash flows using the indirect method.
c. Compute free cash flow.
d. Compute the operating-cash-flow-to-current-liabilities ratio.
e. Compute the operating-cash-flow-to-capital-expenditures ratio.

a. Change in Cash during the current year $Answer Answer

b. Use a negative sign with cash outflow answers.

WOLFF COMPANY Statement of Cash Flows For Year Ended December 31
Cash Flow from Operating Activities
Net Income		Answer
Add (deduct) items to convert net income to cash basis
Depreciation		Answer
Accounts Receivable	Answer	Answer
Inventory	Answer	Answer
Prepaid Insurance	Answer	Answer
Accounts Payable	Answer	Answer
Wages Payable	Answer	Answer
Income Tax Payable	Answer	Answer
Cash Flow Provided by Operating Activities		Answer
Cash Flow from Investing Activities
Purchase of Plant Assets		Answer
Cash Flow from Financing Activities
Issuance of Bonds Payable		Answer
Payment of Dividends		Answer
Cash Provided by Financing Activities		Answer
Net Change in Cash	Answer
Cash at Beginning of Year		Answer
Cash at End of Year		Answer

c. Free cash flow $Answer

d. Operating-cash-flow-to-current-liabilities ratio.
Round answer to two decimal places.
Answer

e. Operating-cash-flow-to-capital-expenditures ratio.
Round answer to two decimal places.
Answer

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