Question 1 Rodriquez Corporation\'s comparative balance sheets are presented bel

Question

Question 1 Rodriquez Corporation's comparative balance sheets are presented below RODRIQUEZ CORPORATION Comparative Balance Sheets December 31 2016 $17,300 22,300 15,750 69,850 2017 Cash Accounts receivable Investments Equipment Accumulated depreciation-equipment $16,700 25,100 20,050 60,250 (13,750) (10,300) Total $108,350 $114,900 Accounts payable Bonds payable Common stock Retained earnings $14,650 10,800 49,800 33,100 $108,350 $11,050 30,100 44,500 29,250 $114,900 Total Additional information: 1. Net income was $18,450. Dividends declared and paid were $14,600 2. Equipment which cost $9,600 and had accumulated depreciation of $1,700 was sold for $3,600 3. No noncash investing and financing activities occurred during 2017

Explanation / Answer

Ans.1 CASH FLOW STATEMENT A Cash flow from Operating Activities: Net income 18450 Add. Depreciation 5150 Loss on sale of Equipment 4300 Operating Profit 9450 Adjustments for Current Assets and Current liabilities: Accounts Payable (14650 - 11050) 3600 Bonds payables (10800 - 30100) -19300 Accounts receivables (25100 - 22300) -2800 -18500 Net cash flow from Operating Activities 9400 B Cash flow from Investing Activities: Investment purchase -4300 Equipment sold 3600 Net cash used in Investing Activities -700 C Cash flow from Financing Activities: Common stock isused 5300 Dividend paid -14600 Net cash used in Financing Activities -9300 Total Cash Flow (A + B + C) -600 Add: Opening cash balance 17300 Closing cash balance 16700 Ans.2 Free cash flow   =    Cash flow from Operation - Capital expenditure 9400 - 4300 5100 *Capital expenditure = Investment Purchase Working Notes: Equipment Account Particulars Amount Particulars Amount To Balance b/d 69850 By P&L (loss on sale) 4300 By cash (sale) 3600 By depreciation 1700 By balance c/d 60250 69850 69850 Accumulated Depreciation Account Particulars Amount Particulars Amount To Equipment 1700 By balance b/d 10300 To Balance c/d 13750 By P&L 5150 15450 15450 *Loss on sale of equipment = Cost - Depreciation - Sales value 9600 - 1700 - 3600 4300

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