1. MIGITSU COMPANY Comparative Balance Sheets December 31 Cash $72,000 $21,000 Accounts receivable 87,000 77,000 Inventories...

1. MIGITSU COMPANY
Comparative Balance Sheets
December 31

Cash	$72,000	$21,000
Accounts receivable	87,000	77,000
Inventories	168,000	190,000
Land	70,000	99,000
Equipment	262,000	202,000
Accumulated depreciation	(66,000)	(34,000)
Total	$593,000	$555,000
Liabilities and Stockholders’ Equity
Accounts payable	$35,000	$45,000
Bonds payable	151,000	208,000
Common stock ($1 par)	218,000	176,000
Retained earnings	189,000	126,000
Total	$593,000	$555,000

Additional information:
1. Net income for 2020 was $97,000.

2. Cash dividends of $34,000 were declared and paid.

3. Bonds payable amounting to $57,000 were redeemed for cash $57,000.

4. Common stock was issued for $42,000 cash.

5. Equipment that cost $45,000 and had a book value of $27,000 was sold for $35,000 during 2020; land was sold at cost.

PART A. Prepare a statement of cash flows for 2020 using the indirect method.

PART B. Compute free cash flow

2020 2019

Cash $14,900 $10,400

Accounts receivable. 21,500. 23,400

Land. 19,700 25,900

Buildings 70,100 70,100

Accumulated depreciation—buildings. (14,800) (10,700)

Total $111,400 $119,100

Accounts payable $12,100 $28,300

Common stock 75,400 73,600

Retained earnings 23,900 17,200

Total $111,400 $119,100

Additional information:

1. Net income was $22,400. Dividends declared and paid were $15,700

2. No noncash investing and financing activities occurred during 2020.

3. The land was sold for cash of $4,900.

PART A.) Prepare a statement of cash flows for 2020 using the indirect method.

PART B.) Compute free cash flow

Solutions

Expert Solution

Q1.
Cash Flow Statement
Cash flows from Operating activities
Net Income for the year			97000
Adjustment required for reconciliation
Gain on sale of equipment			-8000
Depreciation expense			50000
Increase in Accounts receivable			-10000
Decrease in Inventories			22000
Decrease in Accounts payable			-10000
Net cash provided from Operating activities		141000

Cashflows from Investing activities
Sale of Equipment				35000
Purchase of Equipment (202000-45000-262000)	-105000
Sale of Land				29000
Net cash usd in Investing activities			-41000

Cash flows from Financing activities
Redemption of bonds payable			-57000
Issuance of common stock			42000
Dividend paid				-34000
Net cash used in financing activities			-49000
Net increase in cash					51000
Beginning balance of cash				21000
Ending balance of cash				72000

Free cash flows
Net cash provided from Operating activities	141000
Less: Net capital expenditure (105000-35000)	70000
Free cash flows				71000

Q2.
Cash Flow Statement
Cash flows from Operating activities
Net Income for the year			22400
Adjustment required for reconciliation
Loss on sale of land (25900-19700-4900)		1300
Depreciation expense			4100
Decrease in Accounts receivable		1900
Decrease in Accounts payable			-16200
Net cash provided from Operating activities		13500

Cashflows from Investing activities
Sale of Land				4900
Net cash provided from Invsting activities			4900

Cash flows from Financing activities
Dividend paid				-15700
Common stock issued			1800
Net cash used in financing activities			-13900
Net increase in cash					4500
Beginning balance of cash				10400
Ending balance of cash				14900

Free cash flows:
Net cash provided from Operating activities	13500
less: Capital expenditure			0
Free cash flows:				13500

ekkarill92 answered 1 year ago

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