Sharon Feldman, president of Allied Company, considers $44,000 to be a minimum c

Question

Sharon Feldman, president of Allied Company, considers $44,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000 in cash was available at the end of 2011. Because the company reported a large net income for the year, and also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to Ms. Feldman.

The following additional information is available for the year 2011:

The company sold long-term investments with an original cost of $78,000 for $110,000 during the year.

Equipment that had cost $138,000 and on which there was $64,000 in accumulated depreciation was sold during the year for $63,200.

The stock of a dissident stockholder was repurchased for cash and retired during the year. No issues of stock were made.

Using the indirect method, compute the net cash for operating activities for 2011. (Negative amount should be indicated by a minus sign.)

Prepare a statement of cash flows for 2011. (Amounts to be deducted and negative amounts should be indicated with a minus sign.)

Compute the free cash flow for 2011. (Negative amount should be indicated by a minus sign.)

Sharon Feldman, president of Allied Company, considers $44,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000 in cash was available at the end of 2011. Because the company reported a large net income for the year, and also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to Ms. Feldman.

Explanation / Answer

1. Net Cash flow from operating activities:

2. Statemant of Cash flows

Accumulated Depreciation

Equipment

Retained Earnings

$ Net Income 111280 + Tax Expense 47520 Profit before tax 158800 + Loss on sale of equipment 10800 - Gain on sale of investments -32000 + Depreciation expense [222000+64000-197200] 88800 226400 + Decrease in accounts receivable 12400 - Increase in inventory -61200 + Decrease in prepaid expenses 20000 - Decrease in accounts payable -59800 - Decrease in accrued liabilities -9400 Cash flow before tax 128400 - Income tax paid [51000+47520-61200] -37320 Net cash flow from operations 91080

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.