Question

Problem 12-08A

Presented below are the financial statements of Cheyenne Company. Cheyenne Company Comparative Balance Sheets December 31 Assets 2022 2021 Cash $ 112,000 $ 64,000 Accounts receivable 64,000 44,800 Inventory 89,600 64,000 Property, plant, and equipment 192,000 249,600 Accumulated depreciation (102,400 ) (76,800 ) Total $355,200 $345,600 Liabilities and Stockholders’ Equity Accounts payable $ 60,800 $ 48,000 Income taxes payable 22,400 25,600 Bonds payable 54,400 105,600 Common stock 57,600 44,800 Retained earnings 160,000 121,600 Total $355,200 $345,600 Cheyenne Company Income Statement For the Year Ended December 31, 2022 Sales revenue $774,400 Cost of goods sold 560,000 Gross profit 214,400 Selling expenses $57,600 Administrative expenses 19,200 76,800 Income from operations 137,600 Interest expense 9,600 Income before income taxes 128,000 Income tax expense 25,600 Net income $ 102,400 Additional data: 1. Depreciation expense was $56,000. 2. Dividends declared and paid were $64,000. 3. During the year equipment was sold for $27,200 cash. This equipment cost $57,600 originally and had accumulated depreciation of $30,400 at the time of sale. Further analysis reveals the following. 1. Accounts payable pertain to merchandise suppliers. 2. All operating expenses except for depreciation were paid in cash. 3. All depreciation expense is in the selling expense category. 4. All sales and purchases are on account.

Prepare a statement of cash flows for Cheyenne Company using the direct method. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Cheyenne Company Statement of Cash Flows Choose the accounting period For the Year Ended December 31, 2022 Cash Flows from Operating Activities Cash Receipts from Customers 755200 Less Cash Payments To Suppliers 572800 For Operating Expenses Enter a dollar amount For Income Taxes Enter a dollar amount Select an item For Interest Enter a dollar amount Enter a total amount for this subsection Net Cash Provided by Operating Activities Enter a total amount for section one Cash Flows from Investing Activities Sale of Equipment Enter a total amount for section two Issuance of Common Stock Enter a dollar amount Payment of Dividends Enter a dollar amount Redemption of Bonds Enter a dollar amount Net Cash used by Financing Activities Enter a total amount for section three Net Increase in Cash Enter a total amount for three sections Cash at Beginning of Period Enter a dollar amount Cash at End of Period $Enter a total of the two previous amounts

Compute free cash flow. (Show a negative free cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Free cash flow Enter free cash flow in dollars

Answer 1

Answer:

Cheyenne Company
Statement of Cash Flows
For the Year Ended December 31, 2022
Cash Flow from Operating Activities:
Cash Receipts from Customers		$   755,200
Less: Cash payments
to suppliers	$    572,800
For operating expenses	20,800
For income tax expenses	28,800
For interest expenses	9,600	632,000
Net cash provided by operating activity		$   123,200
Cash Flow from Investing Activities:
Sale of Equipment	$      27,200
Net cash provided by Investing Activities		$      27,200
Cash Flow from Financing Activities:
Payment of dividend	$     (64,000)
Redemption of bonds ($105,600 - 54,400)	(51,200)
Common shares issued ($57,600 - 44,800)	12,800
Net cash provided by (used for) Financing Activities		$ (102,400)
Net Increase (Decrease) in Cash		48,000
Cash Balance, September 30, 2023		64,000
Cash Balance, September 30, 2024		$   112,000

(1) Cash Receipts from Customers = Sales + Opening Accounts receivable - Closing Accounts receivable

= 774400 + 44800 - 64000 = $755,200

(2) Cash payment to suppliers = Purchases + Opening accounts payable - Closing accounts payable

= 585600 + 48000 - 60800 = $572,800

Purchase = Cost of goods sold + Closing inventory - opening inventory

= 560000 + 89600 - 64000 = $585,600

(3) Operating expenses = Selling expenses + Administrative expenses - Depreciation expense

= 57600 + 19200 - 56000 = $20,800

(4) Cash payment for income tax expenses = Income tax expense + opening income tax payable - Closing income tax payable = = 25600 + 25600 - 22400 = $28,800

Free Cash Flow = Net cash flow from operating activities - Capital expenditure - Dividend paid in cash

= $ 123,200 - 0 - 64,000 = $ 59,200