Gaines Corporation comparative balance sheet Gaines Corporation Comparative Bala

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Gaines Corporation comparative balance sheet

Gaines Corporation

Comparative Balance Sheets

December 31

                

1.  Net income was $27,900 the dividends declared and paid were $22,500

2.  All other changes are in noncurrent account balances and had a direct effect on cash flows, except the change in accumulated depreciation.  The land was sold for $5,900.

Please perform the following:

A.  Prepare a statement of cash flows for 2014 using the indirect method

B.  Lastly, compute free cash flow

Please provide detailed information.  Gracias

Explanation / Answer

Hi,

Please find the answers as follows;

Part A:

Part B:

Free Cash Flow = Net Cash Provided by Operating Activities - Capital Expenditures - Dividends Paid = 21470 - 0 - 22500 = -1030

Thanks.

Cash Flow Statement Cash Flow from Operating Activities
Net Income 27900 Add Decrease in Accounts Receivable 5200 Depreciation Expense 5000 Loss on Sale of Land (8000 - 5900) 2100 Less Decrease in Accounts Payable -18730 Net Cash Provided by Operating Activities (1) 21470

Cash Flow from Investing Activities
Sale of Land 5900 Net Cash Provided by Investing Activities (2) 5900

Cash Flow from Investing Activities
Issuance of Common Stock (75000 - 69000) 6000 Dividends Paid -22500 Net Cash Provided by Financing Activities (3) -16500

Net Increase in Cash (1+2+3) 10870 Opening Cash Balance 10700 Closing Cash Balance 21570

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