Prepare a statement of cash flows, using the indirect method, with the informati
ID: 2437748 • Letter: P
Question
Prepare a statement of cash flows, using the indirect method, with the information which follows:
ABC Company reports the following comparative balance sheet:
37,000
In addition, ABC Company reports the following income statement items:
Sales Revenue $890,000
COGS $465,000
Operating Expenses 221,000
Interest Expense 12,000
Loss on disposal of equip 2,000 $700,000
Income Before taxes $190,000
Income Tax Expense $65,000
Net Income $125,000
You are also given the following information:
Operating expenses include depreciation expense of $33,000
Land was sold at its book value ($25,000) for cash
Cash dividends of $55,000 were paid in 2018
Interest expense of $12,000 was paid in cash
Equipment with a cost of $166,000 was purchased for cash. Equipment with a cost of $41,000 and a book value of $36,000 was sold for $34,000 cash.
Bonds of $10,000 were redeemed at their face value for cash. Bonds of $30,000 were converted into common stock.
Common stock of $130,000 was issued for cash.
Prepare the statement of cash flows for ABC Company using the indirect method.
Calculate the free cash flows for ABC Company given the above information.
ABC Company Balance Sheet Dec 2018/2017 Assets 2017 2018 Cash37,000
54,000 Accounts Receivable 26,000 68,000 Inventory - 54,000 Prepaid expenses 6,000 4,000 Land 70,000 45,000 Buildings 200,000 200,000 Accumulated Depreciation - buildings (11,000) (21,000) equipment 68,000 193,000 Accumulated Depreciation - equipment (10,000) (28,000) total assets 386,000 569,000Explanation / Answer
Cash flow indirect method Cash flow from operating activities Net income 125000 Adjustments to reconcile the net income Depreciation expense 33000 Loss on sale of equipment 2000 Changes in current asset and liabilities Increase in accounts receivable -42000 Increase in Inventory -54000 Decrease in prepaid expense 2000 decrease in accounts payable -7000 -66000 Cash flow from operating activities 59000 Cash flow from Investing activities Land sold 25000 Equipment sold 34000 Equipment purchased -166000 Cash flow from Investing activities -107000 Cash flow from Financing activities Paid in capital in excess Common stock 130000 Dividend -55000 Bonds payable -10000 Cash flow from Financing activities 65000 Net Cash and cash equivalent 17000 Add Beginning cash and cash equivalent 37000 Ending cash and cash equivalent 54000