I have attached the PDF format of the question, and separately i will attach the excel spreadsheet for the answer. Hopefully that makes it easier. Thank you for all your help. 
B-16.12 Waguespack Corporation and Hedrick Corporation had identical cash positions at the beginning and end of 20X9. Each company also reported a net income of $150,000 for 20X9. Evaluate their cash flow statements that follow. Which company is displaying elements of cash flow stress? What factors cause you to reach this conclusion? What is the importance of evaluating a company's cash flow statement? WAGUESPACK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Gain on sale of equipment Increase in accounts receivable in accounts receivable Decrease in inventory Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities Cash flows from investing activities: Sale of equipment Cash flows from financing activities: Proceeds from long-term borrowing Net increase in cash Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 $ 150,000 $ 20,000 (185,200) (45 (45,000) 37,500 11,400 (3,000) (164,300) $ (14,300) 204,900 20,000 $ 210,600 66,000 $ 276,600 1 of 2 B-16.12 HEDRICK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Decrease in income taxes payable Net cash provided by operating activities Cash flows from investing activities: Purchase of equipment Cash flows from financing activities: Repayment of long-term borrowing Net increase in cash Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 $ 150,000 $ 160,000 43,700 (87,500) (8,100) (8,600) 99,500 $ 249,500 (20,400) (18,500) $ 210,600 66,000 $ 276,600 2 of 2 B-16.12 Waguespack Corporation and Hedrick Corporation had identical cash positions at the beginning and end of 20X9. Each company also reported a net income of $150,000 for 20X9. Evaluate their cash flow statements that follow. Which company is displaying elements of cash flow stress? What factors cause you to reach this conclusion? What is the importance of evaluating a company's cash flow statement? WAGUESPACK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Gain on sale of equipment Increase in accounts receivable Decrease in inventory Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities $150,000 $20,000 (185,200) (45,000) 37,500 11,400 (3,000) (164,300) $(14,300) Cash flows from investing activities: Sale of equipment 204,900 Cash flows from financing activities: Proceeds from long-term borrowing Net increase in cash 20,000 $210,600 Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 66,000 $276,600 HEDRICK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Decrease in income taxes payable Net cash provided by operating activities $150,000 $160,000 43,700 (87,500) (8,100) (8,600) 99,500 $249,500 Cash flows from investing activities: Purchase of equipment (20,400) Cash flows from financing activities: Repayment of long-term borrowing Net increase in cash Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 (18,500) $210,600 66,000 $276,600 1 of 3 Name: Date: B-16.12 Section: . SOLUTION Waguespack Corporation is displaying cash flow stress. Notice that it has negative cash flow from operations. The company's net income would have been a loss without the gain on sale of equipment. In addition, the company is experiencing potentially problematic increases in receivables (i.e., collectibility?), decreases in inventory (i.e., are supply levels adequate?), and increases in payables (i.e., necessary to defer payment?). In addition, the company has sold equipment and borrowed money. Despite these moves, cash decreased during the year. In contrast, Hedrick has positive operating cash flow, has invested in equipment, and reduced debt. B-16.12 B-16.12 Waguespack Corporation and Hedrick Corporation had identical cash positions at the beginning and end of 20X9. Each company also reported a net income of $150,000 for 20X9. Evaluate their cash flow statements that follow. Which company is displaying elements of cash flow stress? What factors cause you to reach this conclusion? What is the importance of evaluating a company's cash flow statement? WAGUESPACK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Gain on sale of equipment Increase in accounts receivable Decrease in inventory Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities $150,000 $20,000 (185,200) (45,000) 37,500 11,400 (3,000) (164,300) $(14,300) Cash flows from investing activities: Sale of equipment 204,900 Cash flows from financing activities: Proceeds from long-term borrowing Net increase in cash 20,000 $210,600 Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 66,000 $276,600 HEDRICK CORPORATION Statement of Cash Flows For the year ending December 31, 20X9 Cash flows from operating activities: Net income Add (deduct) noncash effects on operating income Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Decrease in income taxes payable Net cash provided by operating activities $150,000 $160,000 43,700 (87,500) (8,100) (8,600) 99,500 $249,500 Cash flows from investing activities: Purchase of equipment (20,400) Cash flows from financing activities: Repayment of long-term borrowing Net increase in cash Cash balance at January 1, 20X9 Cash balance at December 31, 20X9 (18,500) $210,600 66,000 $276,600 1 of 3 Name: Date: B-16.12 Section: . SOLUTION Waguespack Corporation is displaying cash flow stress. Notice that it has negative cash flow from operations. The company's net income would have been a loss without the gain on sale of equipment. In addition, the company is experiencing potentially problematic increases in receivables (i.e., collectibility?), decreases in inventory (i.e., are supply levels adequate?), and increases in payables (i.e., necessary to defer payment?). In addition, the company has sold equipment and borrowed money. Despite these moves, cash decreased during the year. In contrast, Hedrick has positive operating cash flow, has invested in equipment, and reduced debt. B-16.12
