706 CHAPTER 14 The Statement of Cash Flows 02 LO3 Statement of Cash Flows: Indir

Question

706 CHAPTER 14 The Statement of Cash Flows 02 LO3 Statement of Cash Flows: Indirect Method LO4 LOS P3. The comparative balance shects for Arif Fabrics, Ine, for December a and 2009 appear beka KA A o% Arif Fabrics, Inc. Comparative Balance Sheets December 31, 2010 and 2009 2010 Assets $ 94,560 102,430 112,890 Cash Accounts receivable (net) Inventory Prepaid expenses Land Building 20,000 25,000 137,000 (15,000) Accumulated depreciation-building Equipment Accumulated depreciation-equipment Patents Total assets (14,500) 4,000 $479,380 6,000 Liabilities and Stockholders' Equity s 10,750 10,000 $ 36,750 Accounts payable Notes payable (current) Accrued liabilities Mortgage payable Common stock, $10 par value Additional paid-in capital Retained earnings Total liabilities and stockholders' equity 12,300 150,000 37200 0,430 $479,380 $276680 162,000 180,000 57,200 59,430 Additional information about Arif Fabrics's operations during 2010 is as fol. lows: (a) net income, $28,000; (b) building and equipment depreciation expenise amounts, $15,000 and S3,000, respectively; (c) equipment that cost S13,500 with accumulated depreciation of $12,500 sold at a gain of $5,300; (d) equip ment purchases, $12,500; (e) patent amortization, $3,000, purchase of paten $1,000; (f) funds borrowed by issuing notes payable, $25,000; notes payable repaid, $15,000; (g) land and building purchased for $162,000 by signing a mortgage for the total cost; (h) 1,500 shares of S20 par value common stock issued for a total of $50,000, and (i) paid cash dividend, $9,000. Required 1. Using the indirect method, prepare a statement of cash flows for Aif User insight 2, why did Arif Fabrics have an increase in cash of $67,200 when it recorded User insight3. Compute and assess cash flow yield and free cash flow for 2010. What is your Fabrics net income of only $28,000? Discuss and interpret. assessment of Arit's cash generating ability? LO2 L04 L03 LOS Statement of Cash Flows: Indirect Method P4. The comparative balance sheets for lopez 31, 2010 and 2009 are presented on the next page. During 2010, thceunescs Ceramics, Inc., for the compary had net income of $48,000 and building and equipment depreciat expenses

Explanation / Answer

Other sub questions are not answered since problem 1 only was required

Cash from operating activities Net Income 19000 add:depreciation 18000 Add:patent amortisation 3000 add:dividend 9000 less:gain on sale of equipment -5300 Cash flow before working capital changes 43700 Add:decrease in prepaid expense 20000 add:decrease in inventory 25000 less:increase in receivables -27000 less:decrease in accounts payable -26000 add:increase in notes payable 10000 less:decrease in accrude liabilities -12300 Cash from operating ativities 33400 33400 Cash from investing Equipment purchase -12500 Land purchased -25000 Patent purchased -1000 Equipment sale 6300 Building purchase -137000 Cash from investing activity -169200 -169200 Cash from financing Mortgage 162000 Common stock 30000 Additional paid in capital 20000 dividend -9000 Cash from financing activity 203000 203000 Cash flow 67200 Ad: cash at the beginning of the period 27360 Cash at the end of the period 94560

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