Cheryl Wilson, president of Rivers Company, considers $25,000 to be a minimum ca

Question

Cheryl Wilson, president of Rivers Company, considers $25,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $20,000 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. Wilson.

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

Net Cash?________________Operating activities?_______________

RIVERS COPANY

Stetement of cash flows- Indirect Method

for the year ended December 31, 2011

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

Cheryl Wilson, president of Rivers Company, considers $25,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $20,000 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. Wilson.

Explanation / Answer

Net income 78,600 Adjustment ADD Depreciation 66000 ADD   Loss on sale of equipment 7000 Less Gain on sale of investment -22500 50500 Decrease in account receivable 10500 Decrease in Prepaid expense 10500 Increase in inventory -55500 Decrease in account payable -56000 Decrease in Accrude liability -7500 increase in tax payable 4500 -93500 Cash flow from Operating Activity 35,600 Cash Flow from Statement Net income 78,600 Adjustment ADD Depreciation 66000 ADD   Loss on sale of equipment 7000 Less Gain on sale of investment -22500 50500 Decrease in account receivable 10500 Decrease in Prepaid expense 10500 Increase in inventory -55500 Decrease in account payable -56000 Decrease in Accrued liability -7500 increase in tax payable 4500 -93500 Cash flow from Operating Activity 35,600 Cash flow from Investing Activity sale of Equipment 48000 Sale of Investment 62500 Purchase of equipment -215000 Cash flow from Investing Activity -104500 Cash flow from Financing Activities Issue of Bonds 105000 Dividend paid -37600 paid to Common stock -17500 Cash flow from Financing Activities 49,900 Total Cash flow -19,000 Opening Cash Balance 39000 Ending Cash flow 20,000 Depreciation for The Period Openning Depreciation 191500 Less Depreciation on sold asset 45000 Less Ending Deprecation 212500 -66000 Dividend Paid Opening retained earnings 156000 ADD Current year income 78,600 Lee ending ratined earnings 1,97,000 Dividend Paid 37,600 Cash flow from Operating Activity 35,600 Cash flow from Investing Activity -104500 Free Cash Flow -68,900

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

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