SOLUTION
Chapter 13 Waterways Continuing Problem
WCP13
(a)
WATERWAYS CORPORATION—Installation Division
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………………………
Adjustments to reconcile net income to net cash
provided by operating activities:
$897,368
Depreciation expense …………………………………………….
Gain on sale of equipment ………………………………………
Increase in accounts receivable ……………………………….
71,319
(18,000)
(138,065)
Increase in work in process……………………………………..
(702,159)
Increase in inventory ………………………………………………
(9,266)
Increase in prepaid expanses ………………………………….
(33,960)
Increase in accounts payable ………………………………….
28,735
Cash flows from investing activities
Purchase of equipment ……………………………………………..
(209,200)
Sale of equipment …………………………………………………….
24,000
Net cash used by investing activities ……………………..
(185,200)
Cash flows from financing activities
Proceeds from bank loan …………………………………………..
15,000
Proceeds from note payable ………………………………………
140,000
Net cash provided by financing activities ………………..
Net increase in cash ………………………………………………………
90,116
Cash at beginning of period …………………………………………….
Cash at end of period …………………………………………………….
Increase in income taxes payable …………………………….
21,355
Increase in wages payable………………………………………
Increase in interest payable …………………………………….
Decrease in other current liabilities …………………………..
(b)
WATERWAYS CORPORATION—Installation Division
Statement of Cash Flows—Direct Method
For the Year Ending December 31, 2017
Cash flows from operating activities
Cash collections from customers ……………………..
(1)
$5,398,012
Less: Cash payments
To suppliers ……………………………………………..
$3,815,467
(2)
Cash flows from investing activities
Purchase of equipment …………………………………..
$ (209,200)
Sale of equipment ………………………………………….
24,000
Net cash used by investing activities ……………..
(185,200)
Cash flows from financing activities
Proceeds from bank loan ………………………………..
$ 15,000
Proceeds from note payable …………………………...
140,000
Net cash provided by financing activities ……….
Net increase in cash …………………………………………..
Cash at beginning of period ………………………………..
Cash at end of period …………………………………………
(1) Sales
$5,536,077
Deduct: Increase in accounts receivable
138,065
Cash collections from customers
$5,398,012
(2) Cost of goods sold
$3,132,777
Add: Increase in work in process
702,159
Deduct: Increase in accounts payable
28,735
Cash payments to suppliers
$3,815,467
(3) Operating expenses
$1,127,159
Deduct: Depreciation
Deduct: Increase in wages payable
731
For operating expenses ……………………………..
(3)
For interest ………………………………………………
(4)
For income taxes ………………………………………
363,231
(5)
(4) Interest expense
Deduct: Increase in interest payable
$ 12,187
(1,187)