Do It! Review 12-3 Blue Spruce Corp. issued the following statement of cash flow

Question

Do It! Review 12-3 Blue Spruce Corp. issued the following statement of cash flows for 2019 Blue Spruce Corp. Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2019 Cash flows from operating activities Net income $58,600 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on disposal of plant assets Increase in inventory Decrease in accounts receivable Decrease in accounts payable $9,100 8,500 (4,700) 3,000 (2,400) 13,500 Net cash provided by operating activities 72,100 Cash flows from investing activities Sale of ivestments Purchase of equipment 3,200 (27,200) Net cash used by ivesting activities (24,000) Cash flows from financing activities Issuance of stock Payment on long-term note payable Payment for dividends 21,200 (12,000) (18,500) (9,300) 38,800 14,500 $53,300 Net cash used by financing activities Net increase in cash Cash at beginning of year Cash at end of year Compute free cash flow for Blue Spruce Corp.. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Free cash flow s Question Attempts: O of 3 used SAVE FOR LATER

Explanation / Answer

Free cash flow for any company means cash flow from oerating activities less capital expenditure. In this case, free cash flow will be computed as follows:

Net cash flow from operations 72,100 less capital expenditure during the year, i.e. 27,200, i.e. free cash flow is 44,900.

Alternatively, net cash can be calculated as cash flow from operations (72,100) less cash flow from investing activities (24,000), i.e. free cash flow 48,100

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