Mini Case: CASH FLOWS AT WARF COMPUTERS, INC.The following informations are given: During the year the company raised $118,000 in new long-term debt and retired $98,000 in long-term debt. The company also sold $11,000 in new stock and repurchased $40,000 in stock. The company purchased $786,000 in fixed assets and sold $139,000 in fixed assets.Balance sheet and Income Statement of the company: photos attached THE TASK: Based on the given informations and financial statements prepare the financial statement of cash flows and the accounting statement of cash flows. Also answer the following questions:How would you describe Warf Computers’ cash flows?Which cash flow statement more accurately describes the cash flows at the company?In light of your previous answers, comment on Nick’s expansion plans. WARF COMPUTERSIncome Statement($ in thousands)Sales$4,844Cost of goods sold2,858Selling, general, and administrative expense543Depreciation159Operating income$1,284Other income48Earnings before interest and taxes (EBIT)$1,332Interest expense95Pretax income$1,237Taxes495Current: $386Deferred: 109Net income$ 742Addition to retained earnings$ 530Dividends$ 212 WARF COMPUTERSBalance Sheet($ in thousands)2010200920102009Current assetsCurrent liabilitiesCash and equivalents$ 290$251Accounts payable$ 262$ 245Accounts receivable428Notes payableAccrued expenses4597166Inventories411425158257Other5950Total current$ 491$ 568Total current assets$1,219$1,154liabilitiesFixed assetsLong-term liabilitiesDeferred taxes$ 212$ 103Property, plant, andequipment$ 2,631$2,038Long-term debt756736Less accumulated859700$ 968$ 839Total long-termliabilitiesdepreciationNet property, plant, andequipment$1,772$1,338Stockholders' equityPreferred stock2$132$13Intangible assets and others508454Common stock8180Total fixed assets$ 2,280$1,792Capital surplus509499Accumulated retained1,5581,028earningsLess treasury stock12181Total equity$2,040$1,539Total liabilities andTotal assets$ 3.499$2,946shareholders' equity$3,499$2,946

a) The firm had positive earnings and had positive cash flow from operations and a positive cash…

Answered: y also sold $11,000 in new stock and…

FINANCIAL ACCOUNTING

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Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Mini Case: CASH FLOWS AT WARF COMPUTERS, INC.

The following informations are given: During the year the company raised $118,000 in new long-term debt and retired $98,000 in long-term debt. The company also sold $11,000 in new stock and repurchased $40,000 in stock. The company purchased $786,000 in fixed assets and sold $139,000 in fixed assets.

Balance sheet and Income Statement of the company: photos attached

THE TASK: Based on the given informations and financial statements prepare the financial statement of cash flows and the accounting statement of cash flows. Also answer the following questions:

How would you describe Warf Computers’ cash flows?
Which cash flow statement more accurately describes the cash flows at the company?
In light of your previous answers, comment on Nick’s expansion plans.

WARF COMPUTERS
Income Statement
($ in thousands)
Sales
$4,844
Cost of goods sold
2,858
Selling, general, and administrative expense
543
Depreciation
159
Operating income
$1,284
Other income
48
Earnings before interest and taxes (EBIT)
$1,332
Interest expense
95
Pretax income
$1,237
Taxes
495
Current: $386
Deferred: 109
Net income
$ 742
Addition to retained earnings
$ 530
Dividends
$ 212

WARF COMPUTERS
Balance Sheet
($ in thousands)
2010
2009
2010
2009
Current assets
Current liabilities
Cash and equivalents
$ 290
$251
Accounts payable
$ 262
$ 245
Accounts receivable
428
Notes payable
Accrued expenses
459
71
66
Inventories
411
425
158
257
Other
59
50
Total current
$ 491
$ 568
Total current assets
$1,219
$1,154
liabilities
Fixed assets
Long-term liabilities
Deferred taxes
$ 212
$ 103
Property, plant, and
equipment
$ 2,631
$2,038
Long-term debt
756
736
Less accumulated
859
700
$ 968
$ 839
Total long-term
liabilities
depreciation
Net property, plant, and
equipment
$1,772
$1,338
Stockholders' equity
Preferred stock
2$
13
2$
13
Intangible assets and others
508
454
Common stock
81
80
Total fixed assets
$ 2,280
$1,792
Capital surplus
509
499
Accumulated retained
1,558
1,028
earnings
Less treasury stock
121
81
Total equity
$2,040
$1,539
Total liabilities and
Total assets
$ 3.499
$2,946
shareholders' equity
$3,499
$2,946

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