Exercise 5-16 A comparative balance sheet for Grouper Corporation is presented b
ID: 2529932 • Letter: E
Question
Exercise 5-16 A comparative balance sheet for Grouper Corporation is presented below December 31 Assets Cash Accounts receivable Inventory Land Equipment Accumulated Depreciation-Equipment (71,400) (44,690) 2017 2016 72,710 $22,000 84,400 68,690 182,400 191,690 73,400 112,690 262,400 202,690 $603,910 $553,070 Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earning:s $ 36,400 $49,690 150,000 200,000 214,000 164,000 203,510 139,380 $603,910 $553,070 Total Additional information: 1. Net income for 2017 was $129,800. No gains or losses were recorded in 2017 2. Cash dividends of $65,670 were declared and paid 3. Bonds payable amounting to $50,000 were retired through issuance of common stock. Prepare a statement of cash flows for 2017 for Grouper Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)Explanation / Answer
Answer:
1
Groper Corporation
Statement of Cash Flows
For the Year Ended December 31,
Cash flows from operating activities
Net income
129800
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense
26710
Decrease in inventory
9290
Increase in accounts receivable
-15710
Decrease in accounts payable
-13290
7000
Net cash provided by operating activities
136800
Cash flows from investing activities
Sale of land
39290
Purchase of equipment
-59710
Net cash used by investing activities
-20420
Cash flows from financing activities
Payment of cash dividends
-65670
Net increase in cash
50710
Cash at beginning of the year
22000
Cash at end fo year
72710
Non cash investing and financing activities:
Issued common stock to retire 50000 of bonds outstanding
______________________________________________
2
Current cash debt coverage ratio
3.18 : 1
Cash debt coverage ratio
0.63 : 1
Free cash flow
11420
Working notes for the above answer is as under
Current cash debt coverage ratio
3.178069
136800/ (49690+36400)/2
Cash debt coverage ratio
0.627393
136800/ (49690+36400)/2+
(150,000+200,000)/2
Free cash flow analysis
Net cash provided by operating activiites
136800
Less: purchase of equipment
-59710
Dividends
-65670
Free cash flow
11420
Groper Corporation
Statement of Cash Flows
For the Year Ended December 31,
Cash flows from operating activities
Net income
129800
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense
26710
Decrease in inventory
9290
Increase in accounts receivable
-15710
Decrease in accounts payable
-13290
7000
Net cash provided by operating activities
136800
Cash flows from investing activities
Sale of land
39290
Purchase of equipment
-59710
Net cash used by investing activities
-20420
Cash flows from financing activities
Payment of cash dividends
-65670
Net increase in cash
50710
Cash at beginning of the year
22000
Cash at end fo year
72710
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