Presented below are the financial statements of Weller Company. WELLER COMPANY C

Question

Presented below are the financial statements of Weller Company.

WELLER COMPANY
Comparative Balance Sheets
December 31

Assets
2012


2011

Cash $ 35,000 $ 20,000
Accounts receivable 33,000 14,000
Merchandise inventory 27,000 20,000
Property, Plant and Equipment 60,000 78,000
Accumulated depreciation
(29,000)


(24,000)

Total
$126,000


$108,000


Liabilities and Stockholders' Equity
Accounts payable $ 29,000 $ 15,000
Income taxes payable 7,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings
45,000


38,000

Total
$126,000


$108,000



WELLER COMPANY
Income Statement
For the Year Ended December 31, 2012

Sales $242,000
Cost of goods sold
175,000

Gross profit 67,000
Operating expenses
24,000

Income from operations 43,000
Interest expense
3,000

Income before income taxes 40,000
Income tax expense
8,000

Net income
$ 32,000


Additional data:

Dividends declared and paid were $25,000.
During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
All depreciation expense, $14,500, is in the selling expense category.
All sales and purchases are on account.

Explanation / Answer

You just need to go line by line with each asset/liability item. For example, a/r went up by $21k so that was a $21k use of cash. This is because when the company sold their product they extended credit to their customers instead of collecting cash. Inventory went down by $14k so that was a source of cash. Instead of stuff sitting around in their warehouse it was sold and is therefore a source of cash. This stuff is hard, I feel for ya. Best of luck, hope I helped a little!

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