Chapter 4 Statement of Cash Flows Use the following information to: A.) Prepare

Question

Chapter 4 Statement of Cash Flows Use the following information to: A.) Prepare the Statement of Cash Flows for Franklin Company using the indirect method B.) Analyze by preparing a Summary Cash Analysis and by commenting as we did on homework Franklin Company Income Statement For the Year Ended December 31, 2015 $9,000 Revenues Depreciation expense Other operating expenses Income before incomfe taxes Interest expense Income tax expense Net income 650 7,100 $1,250 440 270 40 Franklin Company Balance Sheet December 31, 2015 and 2014 2015 2014 2015 2014 Liability & SE: Assets: Cash A/R Inventories Plant & Equipment 3,140 Less: Acc. Depr. 520) Total Assets S3.342 230 480 A/P 510 980 $ 550 280 830 s 370 590 Taxes Payable 120 910 960 LT debt 2,150 (1,520(870) 3LO Common Stock1,100 1,350 Retained Earnings 840 300 Total Liab. & SES3MQ53-310 (870) 10

Explanation / Answer

Workings:

Cash flow statement Particulars Amount Income before tax 810 Add: Interest 440 Add: Depreciation 650 Cash flow before working capital changes: 1900 (Increase)/Decrease in receivables 80 (Increase)/Decrease in inventory -20 Increase/(Decrease) in payables -180 operating Cash flow before taxes 1780 Less: Taxes paid -430 Cash flow from operations 1350 Cash flow from investing activities: Purchase of plant assets -990 Cash flow from investing activities -990 Cash flow from financing activities: Interest paid -360 common stock redemption -250 Cash flow from financing activities -610 Net change in cash -250 Add: Opening cash balance 480 Closing cash balance 230

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