In: Accounting
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
2.
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
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 |