Question
The 2017 and 2016 balance sheets of WalkerWalker Corporation follow. The 2017 income statement is also provided. WalkerWalker had no noncash investing and financing transactions
The 2017 and 2016 balance sheets of WalkerWalker Corporation follow. The 2017 income statement is also provided. WalkerWalker had no noncash investing and financing transactions during 2017. During the year, the company sold equipment for $15,700, which had originally cost $12,900 and had a book value of $11,300. The company did not issue any notes payable during the year but did issue common stock for $27,000. The company purchased plant assets and long-term investments with cash.
Walker Corporation | |||
Income Statement | |||
For the Year Ended December 31, 2017 | |||
Sales revenues |
| $345,000 | |
Less: Cost of goods sold |
| 77,000 | |
Gross profit |
| $268,000 | |
Less operating expenses: |
|
| |
Salaries and wages expense | $27,000 |
| |
Depreciation expense | 4,300 |
| |
Other operating expenses | 14,000 |
| |
Total operating expenses |
| 45,300 | |
Operating income |
| $222,700 | |
Plus other income and less other expenses: |
|
| |
Interest expense | 9,000 |
| |
Gain on sale of PP&E | 4,400 |
| |
Total other income and expenses |
| 4,600 | |
Income before income taxes |
| 218,100 | |
Less: Income tax expense |
| 36,300 | |
Net income |
| $181,800 |
Walker Corporation | |||
Comparative Balance Sheets | |||
December 31, 2017 and 2016 | |||
Assets | 2017 | 2016 | |
Current assets: |
|
| |
Cash | $47,500 | $23,500 | |
Accounts receivable | 32,000 | 29,800 | |
Inventory | 86,400 | 94,800 | |
Prepaid insurance | 3,100 | 2,500 | |
Total current assets | $169,000 | $150,600 | |
|
| ||
Property, plant, and equipment | 150,000 | 139,000 | |
Less: Accumulated depreciation | (30,000) | (27,300) | |
Investments | 112,000 | 0 | |
Total assets | $401,000 | $262,300 | |
|
| ||
Liabilities |
|
| |
Current liabilities: |
|
| |
Accounts payable | $33,500 | $36,600 | |
Wages payable | 3,100 | 7,600 | |
Interest payable | 1,900 | 0 | |
Income taxes payable | 6,000 | 0 | |
Other accrued expenses payable | 18,900 | 22,900 | |
Total current liablities | $63,400 | $67,100 | |
|
| ||
Long-term liabilities | 71,000 | 113,000 | |
Total liabilities | $134,400 | $180,100 | |
|
| ||
Stockholders' equity |
|
| |
Common stock | $103,000 | $76,000 | |
Retained earnings | 163,600 | 6,200 | |
Total stockholders' equity | $266,600 | $82,200 | |
|
| ||
Total liabilities and equity | $401,000 | $262,300 |
Requirements
1. Prepare the statement of cash flows for WalkerWalker 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.
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