Question

Access the April 14, 2016, filing of the 10-K report (for year ending December 31, 2015) of Mendocino Brewing Company, Inc. (ticker: MENB) at SEC. gov.

Required

1. Does Mendocino Brewing use the direct or indirect method to construct its consolidated statement of cash flows?

2. For the year ended December 31, 2015, what is the largest item in reconciling the net income (or loss) to net cash provided by operating activities?

3. In the recent two years, has the company been more successful in generating operating cash flows or in generating net income? Identify the figures to support the answer.

4. In the year ended December 31, 2015, what was the largest cash outflow for investing activities and for financing activities?

5. What item(s) does the company report as supplemental cash flow information?

6. Does the company report any noncash financing activities for 2015? Identify them, if any.

Answer 1

1. Mendocino Brewing uses the indirect method to construct its consolidated statement of cash flows (Reason - the cash flow from operating activities starts with Net Income and adjustments are made to derive cash from operating activities from net income)

2. For the year ended December 31, 2015 the largest item in reconciling the net income (or loss) to net cash provided by operating activities is the Depreciation and amortization (which totals $1,226,200 in 2015)

3. In the recent two years, the company been more successful in generating operating cash flows than in generating net income. The company infact suffered a net loss of $1,539,500 in 2014 and $1,148,500 in 2015 while it generated Net Cash from operating activities of $793,400 in 2014 and $1,105,900 in 2015.

4. In the year ended December 31, 2015, the largest cash outflow for investing activities was Purchases of property, equipment and leasehold improvements equaling $642,400 and for financing activities it was Repayment on long-term debts totaling $534,700

5. The company reports the following items as supplemental cash flow information

Cash paid during the period for Interest = $432,900

Cash paid during the period for income taxes = $3,800

6. The company reports the following non-cash financing activities for 2015

Seller financed assets = $105,600

Notes

The financial statements of all publically listed companies are available either on their websites or the website of the Securities & Exchange commission.

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