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EXERCISE 14-6 Prepare a statement of Cash Flows; Free Cash Flow (L014-1, L014-2, L014-3] Comparative financial statement data for Carmono Company follow: This Year Last Year *** Assets Cash... ....................... Accounts receivable ........... Inventory Total current assets Property, plant, and equipment ............. Less accumulated depreciation ........... Net property, plant, and equipment ......... Total assets ........ Liabilities and Stockholders' Equity Accounts payable ......... Common stock Retained earnings ......... Total liabilities and stockholders' equity ....... $ 40 150 $ 36 145 39 $250 $220 For this year, the company reported net income as follows: Sales ......... Cost of goods sold ..................... Gross margin Selling and administrative expenses ........ Net income ........................... $275 150 125 90 $ 35 This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year. Required: 1. Using the indirect method, prepare a statement of cash flows for this year. 2. Compute Carmono's free cash flow for this year.

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PROBLEM 14-10 Prepare a statement of Cash Flows; Free Cash Flow (L014-1, L014-2, L014-3] Joyner Company's income statement for Year 2 follows: Sales ....... Cost of goods sold ............ Gross margin ........... Selling and administrative expenses .... Net operating income ........... Gain on sale of equipment ........... Income before taxes ............ Income taxes ................. Net income ............. $900,000 500,000 400,000 328,000 72,000 8,000 80,000 24,000 $ 56,000 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash ............ Accounts receivable ......... Inventory ........................... Prepaid expenses .................... Total current assets ................... Property, plant, and equipment. ......... Less accumulated depreciation ........ Net property, plant, and equipment ....... Loan to Hymans Company ............. Total assets $ 4,000 250,000 310,000 7,000 571,000 510,000 132,000 378,000 40,000 $989,000 $ 21,000 170,000 260,000 14,000 465,000 400,000 120,000 280,000 $745,000 Liabilities and Stockholders' Equity Accounts payable Accrued liabilities ...... Income taxes payable ....... Total current liabilities ........ Bonds payable .......... Total liabilities .......... Common stock ............. Retained earnings ................. Total stockholders' equity ............. Total liabilities and stockholders' equity... $310,000 20,000 45,000 375,000 190,000 565,000 300,000 124,000 424,000 $989,000 $250,000 30,000 42,000 322,000 70,000 392,000 270,000 83,000 353,000 $745,000 Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock. Required: 1. Using the indirect method, compute the net cash provided by operating activities for Year 2. 2. Prepare a statement of cash flows for Year 2. 3. Compute the free cash flow for Year 2. 4. Briefly explain why cash declined so sharply during the year.

PROBLEM 14-12 Prepare a statement of Cash Flows (L014-1, L014-2] A comparative balance sheet and an income statement for Burgess Company are given below: Burgess Company Comparative Balance Sheet (dollars in millions) Ending Balance Beginning Balance $ 79 580 5 $ 49 645 660 1,354 1,515 765 750 $2,104 466 1 $2,099 Assets Current assets: Cash and cash equivalents ... Accounts receivable Inventory Total current assets ........... Property, plant, and equipment. Less accumulated depreciation .. Net property, plant, and equipment.... Total assets ..... Liabilities and Stockholders' Equity Current liabilities: Accounts payable ... Accrued liabilities ........... Income taxes payable ......... Total current liabilities. Bonds payable............ Total liabilities ............ Stockholders' equity: Common stock Retained earnings ... Total stockholders' equity ........... Total liabilities and stockholders' equity ..... $ 250 $ 155 165 151 010 161 161 1,089 $2,099 Burgess Company Income Statement (dollars in millions) Net sales ....... Cost of goods sold ...... Gross margin Selling and administrative expenses ...... Net operating income ... Nonoperating items: Gain on sale of equipment .... Income before taxes... Income taxes ........................... Net income ................................ $3,600 2,550 1,050 875 175 115 Burgess also provided the following information: 1. The company sold equipment that had an original cost of $13 million and accumulated depre- ciation of $8 million. The cash proceeds from the sale were $8 million. The gain on the sale was $3 million 2. The company did not issue any new bonds during the year. 3. The company paid a cash dividend during the year. 4. The company did not complete any common stock transactions during the year. Required: 1. Using the indirect method, prepare a statement of cash flows for the year. 2. Assume that Burgess had sales of $3,800, net income of $135, and net cash provided by oper ating activities of $150 in the prior year (all numbers are stated in millions). Prepare a memo that summarizes your interpretations of Burgess's financial performance.

PROBLEM 14-7 Prepare a statement of Cash Flows (L014-1, L014-2] Comparative financial statements for Weaver Company follow Weaver Company Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Assets Cash ........ 340 484 Accounts receivable ................. Inventory ........................... Prepaid expenses ..................... Total current assets .................... Property, plant, and equipment ........... Less accumulated depreciation ......... Net property, plant, and equipment ....... Long-term investments .......... Total assets ..... *******41118 8801981123382982513 $ Liabilities and Stockholders' Equity Accounts payable ... Accrued liabilities Income taxes payable ......... Total current liabilities ........ Bonds payable .................. Total liabilities ........................ Common stock ....................... Retained earnings ................... Total stockholders' equity .............. Total liabilities and stockholders' equity .... 310 700 210 107 Weaver Company Income Statement For the Year Ended December 31, 2014 $800 500 300 213 Sales ......... Cost of goods sold .................. Gross margin ........... Selling and administrative expenses ..... Net operating income ....... Nonoperating items: Gain on sale of investments ......... Loss on sale of equipment .......... Income before taxes ................. Income taxes . . . . . . . . . ... Net income ...................... During 2014, Weaver sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that had cost $3 when purchased several years ago. A cash dividend was paid during 2014 and the company repurchased $40 of its own stock. Weaver did not retire any bonds dur- ing 2014 Required: 1. Using the indirect method, determine the net cash provided by operating activities for 2014. 2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2014.

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