MGAB02H3 Lecture Notes - Lecture 4: Interest Expense, Financial Statement, Cash Flow

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peachturtle345

6 Jan 2016

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Increase in trade receivables (,000 ,000) (5,000) Decrease in inventory (,000 ,000) (3,000) Decrease in trade payables (,000 ,000) Decrease in wages payable (,000 ) (200) Increase in income tax payable (,000 ,000) During 2014, the company also purchased machinery for ,000, which was partially financed with a four-year ,000 note payable to the dealer. **income taxes paid = income tax expense increase in income taxes payable. The quality of earnings ratio measures the portion of income that was generated in cash. The ratio is greater than 1 primarily because of the large non-cash depreciation expense that reduced net earnings but did not affect cash. Cash flow from operations = ,000 = 1. 26. The capital expenditures ratio measures the company"s ability to finance plant and equipment purchases from operations without the need to issue shares, borrow from creditors, or to sell long-lived assets.

Related Questions

Statement of Cash Flows

The following is a list of the items to be included in thepreparation of Warrick Company's 2016 statement of cash flows:

Net income, $59,200

Payment for purchase of building, $98,000

Increase in accounts receivable, $7,400

Proceeds from issuance of common stock, $37,100

Increase in accounts payable, $4,500

Proceeds from sale of land, $7,000

Depreciation expense, $12,600

Payment of dividends, $36,000

Gain on sale of land, $5,300

Decrease in inventory, $3,700

Payment for purchase of long-term investments, $9,600

Amortization of discount on bonds payable, $1,900

Proceeds from issuance of note, $18,000

Increase in deferred taxes payable, $5,000

Equipment acquired by capital lease, $19,500

Decrease in salaries payable, $2,300

Beginning cash balance, $20,300

Required

1. Prepare the statement of cash flows.

WARRICK COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:
Net income	$
Adjustment for noncash income items:
Add: Depreciation expense
Add: Amortization of discount on bonds payable
Add: Accumulated depreciation
Less: Gain on sale of land
Adjustments for cash flow effects from working capital items:
Increase in accounts receivable
Decrease in inventory
Increase in accounts payable
Decrease in salaries payable
Net cash provided by operating activities		$
Investing Activities:
Payment for purchase of building	$
Proceeds from sale of land
Payment for purchase of long-term investments
Net cash used for investing activities
Financing Activities:
Proceeds from issuance of common stock	$
Payment of accounts payable
Proceeds from issuance of note
Net cash provided by financing activities
Net Decrease in Cash		$
Cash, January 1, 2016
Cash, December 31, 2016		$

Investing and Financing Activities Not Affecting Cash
Investing Activities:
Acquisition of equipment under capital lease		$
Financing Activities:
Incurrence of capital lease obligation for equipment

The accounting records of EZ Company provided the data below. Net income $ 50,000 Depreciation expense 7,000 Increase in inventory 1,500 Decrease in salaries payable 800 Decrease in accounts receivable 2,000 Amortization of patent 500 Amortization of premium on bonds 1,000 Increase in accounts payable 4,000 Cash dividends paid 12,000 Prepare a reconciliation of net income to net cash flows from operating activities

turquoisemink78

EXERCISE 14-3 Calculating Free Cash Flow (L014-3] Apex Company prepared the statement of cash flows for the current year that is shown below: i $ 40,000 (6,000 34,000 Apex Company Statement of Cash Flows-Indirect Method Operating activities: Net income ................................ Adjustments to convert net income to cash basis: Depreciation ...... $ 22,000 Increase in accounts receivable .......... (60,000) Increase in inventory .... (25,000) Decrease in prepaid expenses .......... 9,000 Increase in accounts payable ............... 55,000 Decrease in accrued liabilities .......... (12,000) Increase in income taxes payable ......... 5,000 Net cash provided by operating activities ......... Investing activities: Proceeds from the sale of equipment ............. 14,000 Loan to Thomas Company ........ (40,000) Additions to plant and equipment ................ (110,000 Net cash used for investing activities ......... Financing activities: Increase in bonds payable .. 90,000 Increase in common stock ........... 40,000 Cash dividends (30,000) Net cash provided by financing activities. Net decrease in cash ..... Beginning cash balance........... Ending cash balance ...................... (136,000) 100,000 (2,000) 27,000 $ 25,000 Required: Compute Apex Company's free cash flow for the current year.

MGAB02H3 Lecture Notes - Lecture 4: Interest Expense, Financial Statement, Cash Flow

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