Exercise 5-15 2017 2016 Adjustments to reconcile net income to Open Show Work Ex

Question

Exercise 5-15

2017

2016

Adjustments to reconcile net income to

Open Show Work

Exercise 5-15

Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.

2017

2016

Cash $ 177,000 $ 78,000 Accounts receivable 180,000 185,000 Investments 52,000 74,000 Equipment 298,000 240,000 Accumulated Depreciation-Equipment (106,000 ) (89,000 ) Current liabilities 134,000 151,000 Common stock 160,000 160,000 Retained earnings 307,000 177,000
Additional information:

Investments were sold at a loss of $10,000; no equipment was sold; cash dividends paid were $30,000; and net income was $160,000.

Explanation / Answer

Solution:

Free cash flow = Operating cash flow - Capital expenditure

= $175,000 - $58,000

= $117,000

Zubin Mehta Corporation Statement of Cash Flows For year ended December 31, 2017 Particulars Details Amount Cash Flow from Operating Activities: Net Income $160,000.00 Adjustments to reconcile net income to net cash provided by operations: Depreciation Expense ($106,000 - $89,000) $17,000.00 Loss on sale of investment $10,000.00 Decrease in accounts receivables ($185,000 - $180,000) $5,000.00 Decrease in current liabilties ($151,000 - $134,000) -$17,000.00 Net Cash provided by operating activities $175,000.00 Cash Flow from Investing Activities: Purchase of Equipment ($298,000 - $240,000) -$58,000.00 Sale of investment ($74,000 - $52,000 - $10,000) $12,000.00 Net Cash Provided by Investing activities -$46,000.00 Cash Flow from Financing Activities: Dividend Paid -$30,000.00 Net Cash Provided by financing activities -$30,000.00 Net Increase / (Decrease) in Cash $99,000.00 Cash balance at beginning of year $78,000.00 Cash balance at end of year $177,000.00

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