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1. Waterways sold a piece of company equipment for $24,000. The equipment had been used for ten years. It had cost $80,000 when purchases and had a 10-years life and a $6,000 salvage value. Straight-line depreciation was used.

2. Waterways purchased new equipment costing $209,200.

3. The division paid $50,000 in dividends.

Waterways Corporation - Installation Division

Income Statement

For the year ending December 31

Sales

$5,536,077

Less: Cost of goods sold

3,132,777

Gross Profit

2,403,300

Operating expenses:

Advertising

$50,000

Insurance

400,000

Salaries and wages

584,640

Depreciation

71,319

Other operating expenses

21,200

Total operating expenses

1,127,159

Income from operations

1,276,141

Other income

Gain on sale of equip

18,000

Other expenses

Interest expense

(12,187)

Net other income and expenses

5,813

Income before income tax

1,281,954

Income tax expenses

384,586

Net income

$897,368

Waterways Corporation - Installation Division

Balance Sheet

December 31

Assets

This Year

Last Year

Current assets

Cash

$786,797

$746,681

Accounts receivable

680,750

542,685

Work in process

702,159

0

Inventory

16,766

7,500

Prepaid expenses

76,550

42,590

Total current assets

2,263,022

1,339,456

Property, plant, and equipment

Furnishings

40,416

40,416

Equipment

929,400

800,200

Buildings

450,000

450,000

Land

300,000

300,000

Accumulated depreciation

(482,523)

(485,204)

Total property, plant, and

equipment

1,237,293

1,105,412

Total Assets

$3,500,315

$2,444,868

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$157,095

$128,360

Income taxes payable

101,344

79,989

Wages payable

4,517

1,984

Interest payable

1,187

0

Other current liabilities

14,515

15,246

Revolving bank loan payable

15,000

0

Total current liabilities

293,658

225,579

Long-term liabilities

Notes payable

140,000

0

Total liabilities

433,658

225,579

Stockholders' equity

Common stock

1,250,000

1,250,000

Retained earnings

1,816,657

969,289

Total stockholders' equity

3,066,657

2,219,289

Total liabilities and stockholders' equity

$3,500,315

$2,444,868

Instructions:

a. Prepare a statement of cash flow using the indirect method for this year.

b. Determine free cash flow.

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Hubert Koch
Hubert KochLv2
28 Sep 2019

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