MOLINA COMPANY Comparative Balance Sheets December 31 compure free cash ow SO 3,

Question

MOLINA COMPANY Comparative Balance Sheets December 31 compure free cash ow SO 3, 4) Cash Accounts receivable Merchandise inventory Property, plant, and equipment 28,000 23,000 41,000 33,000 14,000 25,000 $70,000 78,000 27000)43,000 24000) 54000 $126,000 Total $135.000 Liabllities and Stockholders Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 31,000 26,000 20,000 25,000 33,000 $135,000 43,000 20,000 10,000 25,000 Total MOLINA COMPANY Income Statement For the Year Ended December 31, 2008 Sales Cost of goods sold Gross profit Selling expenscs 9,00037000 55,000 7,000 Income from operations Interest expense Income before income taxes Income tax expense Net income Additional data: Dividends of ea0 were declared and paid 2 During the year equipment was sold for $10,000 cash.This equipment cost $13,000 originatiy All depreciation expense, Sereeo, is in the selling expense category. 4 All sales and purchases are on account. 5. Additional equipment was purchased for $5,000 cash. (a) Cash from operations (a) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow. $13,000 "P14-88 Date for Molina Company are presented in P14-7B. Purther analysis reveals the Prepare a talement of cas compute free cath flow 1. Accounts payabie pertains to merchandise areditors. 2 All operating expenscs cxoept for depreciation are paid in cash. SO 4, 6) o) Cosh from (a) Prepare a statement of cash flows using the direct method. b) Compute free cash flow. $13,000

Explanation / Answer

a. cash flow statement

Cash flow from operating activities

net income 38000

Add: Depreciation 6000

   44000

less: increase in accounts receivable (9000)

less: increase in inventory (16000)

less: decrease in accounts payable (12000)

Add: increase in income tax payable 6000

Net cash provided by operating activities 13000

Cash flow from financing activities

Dividend paid ( 33000)

issue of bonds 10000   

Net cash used by financing activities (23000)

Cash flow from investing activities

purchase of equipment (5000)

sale of equipment    10000

Net cash povided by investing activities 5000

Net decrease in cash (5000)

Add: cash at beginning 33000

Cash at end 28000

b. Free cash flow = cash flow from operations - capital expenditure - dividend

= 13000 - 5000 - 33000

= (25000)

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