Question

Megan Corporation's net income last year was $101,000. Changes in the company's balance sheet accounts for the year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents	$	(5,400	)
Accounts receivable	$	(17,000	)
Inventory	$	4,500
Prepaid expenses	$	(9,100	)
Long-term investments	$	83,000
Property, plant, and equipment	$	61,000
Accumulated depreciation	$	64,000
Liability and Equity Accounts:
Accounts payable	$	0
Accrued liabilities	$	17,020
Income taxes payable	$	(12,120	)
Bonds payable	$	(34,500	)
Common stock	$	23,000
Retained earnings	$	59,600

The company paid a cash dividend of $41,400 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.

The free cash flow for the year was:

Answer 1

Answer:-

Calculation of Free cash flow:-

Net cash flow provided by operating activities=                      $191500

Less:-Capital Expenditures                                                     -$61000

Less:-Dividends                                                                       -$41400

Free cash flow                                                                          $89100

Explanation:-

Megan Corporation
Statement of Cash Flow (Using Indirect Method)
For the year ended
Particulars		Amount
		$
Cash flow from opreating activities
Net Income		101000
Adjustments to reconcile net income to net cash provided by opreating activities
Adjustment for non cash effects
Depreciation		64000
Change in opreating assets & liabilities
Decrease in accounts receiveble		17000
Increase in inventory		-4500
Decrease in prepaid expenses		9100
Increase in accrued liabilities		17020
Decrease in income tax payable		-12120
Net cash flow from opreating activities (a)		191500