Question

13-8A Prepare a statement of cash flows - direct method, and compute free cash flow.

NOSKER COMPANY
Comparative Balance Sheet
December 31

Assets	2017		2016
Cash	$38,000		$20,000
Accounts Receivable	30,000		14,000
Inventory	27,000		20,000
Equipment	60,000		78,000
Accumulated depreciation--equipment	(29,000)		(24,000)
Total	$126,000		$108,000

Liabilities and Stockholders' Equity
Accounts payable	$24,000		$15,000
Income taxes payable	7,000		8,000
Bonds payable	27,000		33,000
Common stock	18,000		14,000
Retained earnings	50,000		38,000
Total	$126,000		$108,000

NOSKER COMPANY
Income Statement
For the Year ended December 31, 2017

Sales revenue	$242,000
Cost of goods sold	175,000
Gross profit	67,000
Operating expenses	24,000
Income from operations	43,000
Interest expense	3,000
Income before income taxes	40,000
Income tax expense	8,000
Net income	$32,000

Additional data:

1. Dividends declared and paid were $20,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense, $14,500, is in the operating expenses.
4. All sales and purchases are on account.

Data for Nosker Company is presented above. Further analysis reveals the following.

1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash.

Instructions

(a) Prepare a statement of cash flows using the direct method.
(b) Compute free cash flow.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a)

NOSKER COMPANY
Statement of Cash Flows
For the Year ended December 31, 2017

Cash flows from operating activities
Cash receipts from customers		Choose...$226,000$11,50020,0009,500$173,000
Less cash payments:
To suppliers	Choose...$226,000$11,50020,0009,500$173,000
For operating expenses	Choose...$226,000$11,50020,0009,500$173,000
For income taxes	Choose...8,50031,5003,000194,50020,0009,000
For interest	Choose...8,50031,5003,000194,50020,0009,000	Choose...8,50031,5003,000194,50020,0009,000
Net cash provided by operating activities		Choose...8,50031,5003,000194,50020,0009,000
Cash flows from investing activities
Sale of equipment	Choose...8,50031,5003,000194,50020,0009,000
Net cash provided by investing activities		Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Cash flows from financing activities
Issuance of common stock	Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Redemption of bonds	Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Payment of dividends	Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Net cash used by financing activities		Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Net increase in cash		Choose...(6,000)8,50018,0004,000(20,000)(22,000)
Cash at beginning of period		Choose...$38,000$0$31,50020,000
Cash at end of period		Choose...$38,000$0$31,50020,000

(b)

Free Cash Flow:
Net cash provided by operating activities		Choose...$38,000$0$31,50020,000
Less: Capital expenditures	Choose...$38,000$0$31,50020,000
Cash dividends	Choose...8,50031,5003,000194,50020,0009,000	Choose...$226,000$11,50020,0009,500$173,000
Free Cash Flow		Choose...$226,000$11,50020,0009,500$173,000

Answer 1