Waterways Continuing Problem 13 (Direct Method) Waterways prepared the balance s

Question

Waterways Continuing Problem 13 (Direct Method)

Waterways prepared the balance sheet and income statement for the irrigation installation division for 2016. Now the company also needs to prepare a cash flow statement for the same division. The comparative balance sheets for Waterways Corporation’s Irrigation Installation Division for the years 2015 and 2016 and the income statement for the year 2016 are presented below.

Additional information:

(b)

Prepare a statement of cash flows using the direct method for the year 2013. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

(c)

Determine free cash flow for the year 2016. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

1. Waterways sold a company vehicle for $24,000. The vehicle had been used for 10 years. It cost $80,000 when purchased and had a 10-year life and a $6,000 salvage value. Straight-line depreciation was used. 2. Waterways purchased with cash new equipment costing $209,200. 3. Prepaid expenses increased by $33,960.

Explanation / Answer

Column1 Column2 Column3 Column4 Column5 Column6 direct method of cash flow Cash from customers 5,398,012 less: cash paid to suppliers -3,815,467 Cash paid for operating expense -1,072,998 interest paid -11,000 Income tax paid -363,231 135,316 Net cash from operating activities 135,316 Cash from investing activities Cash sale of equipment 24,000 Purchase of new equipment -209,200 -185,200 Net cash used by investing activities -185,200 Cash from financing activities Cash from notes payable 140,000 Net cash from financing activities 140,000 Net cash increase 90,116 Cash at the beginning 746,681 Cash at the end 836,797 c) Free cash flow = 135,316

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