2. Svoboda Corporation comparative balance sheets at December 31 (in millions) L

Question

2. Svoboda Corporation comparative balance sheets at December 31 (in millions) LIABILITIES AND SHAREHOLDERS' EQUITY 20X1 20X2 ASSETS Cash Accounts receivable Inventories Fixed assets, net Other assets 20X120X2 % 5 Notes payable Accounts payable Accrued wages Accrued taxes Long-term debt Common stock Retained earnings $20 12 50 15 15 26 20 40 Total liabilities and Total assets $90 $100 shareholders' equity $90 $100 Svoboda Corporation statement of income and retained earnings, year ended December 31, 20X2 (in millions) $48 Net sales Expenses $25 Cost of goods sold Selling, general, and administrative expenses Depreciation Interest 37 %11 4 Net income before taxes Less: Taxes Add: Retained earnings at 12/31/Xl Less: Dividends Net income 40 $47 Subtotal Retained earnings at 12/31/X2 a. Prepare a flow of funds (sources and uses of funds) statement for 20X2 for the Svoboda Corporation 197 Financial Analysis and Planning b. Prepare a statement of cash flows for 20X2 using the indirect method for the Svoboda Corporation

Explanation / Answer

a.    Statement of source and uses of funds

     

Note:- Statement of change in working capital

20X1 20X2   

Current assets :

Cash 5 3

Accounts receivable 15 22

Inventories 12 15

32 40

Current liabilites:

  Notes payable 20 0

Accounts payable 5 8

Accrued wages 2 2

Accrued taxes 3       5

30 15

Working capital 2 25

Change in working capital [25-2] 23 increase

Source of funds (inflow) is cash coming in the company and Use of funds (outflow) is cash going out of the company ,Current assets and liabilities are not considered for it.

b.    Statement of cash flow   

Cash flow from operating activities

Net income 7

Add: Adjustments:

Depreciation 5

   12

increase in Accounts receivable (7)

  increase in Inventories (3)

Decrease in Notes payable (20)

Increase in accounts payable 3

Increase in Accrued taxes 2

Net cash used by operating activities (13)

Cash flow from financing activities

Dividend paid (3)

Proceed from common stock 6

Issued long term debt 15   

Net cash provided by financing activities 18

Cash flow from Investing activities

   Purchase of Fixed assets (10)

Sale of other assets    3   

Net cash used by investing activities (7)

Decrease in cash (2)

Add: Cash at beginning    5   

Cash at end 3

Note:- Fixed Assets ,Net

Source of funds (inflow) Uses of funds (outflow) Common stock [20-26] 6    Fixed assets 10 fund from operating [7 net income + 5 depreciation] 12 payment of dividend 3 Long term debt 15 Increase in working capital [B/F] 23 Other assets 3 36 36

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