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W P13-33A (similar to) is Question Help The 2017 and 2016 balance sheets of Watson Corporation follow. The 2017 income statement is also provided. Watson had no noncash investing and financing transactions during 2017. During the year, the company sold equipment for $15.200, which had originally cost $13,300 and had a book value of $11,200. The company did not issue any noles payable during the year but did issue common stock for $37,000. The company purchased plant assets and long-term Investments with cash. (Click the icon to view the income statement.) ! (Click the icon to view the balance sheets.) Requirements 1. Prepare the statement of cash flows for Watson Corporation for 2017 using the indirect method. 2. Evaluate the company's cash flows for the year. Discuss each of the categories of cash flows in your response. Requirement 1. Prepare the statement of cash flows for Watson Corporation for 2017 using the indirect method. Prepare the statement one section at a time. (Use parentheses or a minus sign for numbers to be subtracted or for a net cash outflow.) Watson Corporation Statement of Cash Flows (Indirect Method) For the Year Ended December 31, 2017 $ 177,400 Operating Activities: Net income Adjustments to reconcile net income to cash basis: Depreciation expense Gain on sale of equipment Increase in accounts receivable Decrease in inventory 5,600 (4,000) (2.700) 7,300 $ 5,600 Adjustments to reconcile net income to cash basis: Depreciation expense Gain on sale of equipment Increase in accounts receivable Decrease in inventory Increase in prepaid insurance Decrease in accounts payable Decrease in salaries payable Increase in interest payable Increase in taxes payable (4,000) (2,700) 7,300 (700) (2,800) (4,300) 2,300 6,200 (3,500) Decrease in other accrued expenses payable 3,400 180,800 Net cash provided by (used for) operating activities Investing Activities: _ (3,500) 3,400 180,800 Decrease in other accrued expenses payable Net cash provided by (used for) operating activities Investing Activities: Proceeds on sale of equipment Purchase of equipment 15,200 (25,300) (117,000) Purchase of stock investments (127,100) Net cash provided by (used for) investing activities Financing Activities: Cash payments for dividends Repayment of long-term debt (26,200) (40,000) 37,000 Issuance of common stock Net cash provided by (used for) financing activities (29,200) Cash payments for dividends Repayment of long-term debt (26,200) (40,000) 37,000 Issuance of common stock Net cash provided by (used for) financing activities Net increase (decrease) in cash (29,200) 24,500 24,000 48,500 Cash, beginning of the year Cash, end of the year Requirement 2. Evaluate the company's cash flows for the year. Discuss each of the categories of cash flows in your response. Watson Corporation's cash flows look used some cash. These activities included strong. They had $ 180,800 provided by operating activities. The investing activities purchasing a stock investment and equipment. The financing activities used cash to pay dividends and to pay down long-term debt . The corporation also issued some additional common stock . Watson Corporation Income Statement For the Year Ended December 31, 2017 Sales revenues $ 342,000 79,000 Less: Cost of goods sold $ 263,000 Gross profit Less operating expenses: Salaries and wages expense Depreciation expense 24,000 5,600 15,500 Other operating expenses 45,100 $ 217,900 Total operating expenses Operating income Plus other income and less other expenses: Interest expense 9,100 4,000 Gain on sale of PP&E Income Statement 79,000 $ 263,000 Less: Cost of goods sold Gross profit Less operating expenses: Salaries and wages expense Depreciation expense $ 24,000 5,600 15,500 Other operating expenses 45,100 Total operating expenses Operating income Plus other income and less other expenses: $ 217,900 Interest expense 9,100 4,000 Gain on sale of PP&E 5,100 Total other income and expenses Income before income taxes 212,800 35,400 Less: Income tax expense $ 177,400 Net income Watson Corporation Comparative Balance Sheets December 31, 2017 and 2016 Assets 2017 2016 Current assets: LA Cash Accounts receivable 48,500 $ 31,700 86,100 3,400 24,000 29,000 93,400 2,700 Inventory Prepaid insurance Total current assets 169,700 $ 149,100 Property, plant, and equipment Less: Accumulated depreciation 151,000 (30,500) 117,000 139,000 (27,000) Investments $ 407,200 $ 261,100 Total assets Investments 117,000 407,200 $ $ 261,100 Total assets Liabilities Current liabilities: $ Accounts payable Wages payable 33,300 $ 3,100 2,300 6,200 18,700 36,100 7,400 0 Interest payable Income taxes payable 22,200 Other accrued expenses payable Total current liablities 63,600 $ 65,700 Long-term liabilities 73,000 113,000 Total liabilities $ 136,600 $ 178,700 7,400 Wages payable Interest payable 3,100 2,300 6,200 18,700 Income taxes payable 22,200 Other accrued expenses payable Total current liablities $ 63,600 $ 65,700 73,000 113,000 Long-term liabilities Total liabilities $ 136,600 $ 178,700 Stockholders' equity Common stock $ 108,000 $ 162,600 71,000 11,400 Retained earnings $ 270,600 $ 82,400 Total stockholders' equity $ 407,200 $ 261,100 Total liabilities and equity
