Question

Exercise 11-47
Preparing the Statement of Cash Flows

The comparative balance sheets for Beckwith Products Company are presented below.

	2019		2018
Assets:
Cash	$ 36,950		$ 25,000
Accounts receivable	75,100		78,000
Inventory	45,300		36,000
Property, plant, and equipment	256,400		153,000
Accumulated depreciation	38,650		20,000
Total assets	$375,100		$272,000
Liabilities and Equity:
Accounts payable	$13,100		$11,000
Interest payable	11,500		8,000
Wages payable	8,100		9,000
Notes payable	105,000		90,000
Common stock	100,000		50,000
Retained earnings	137,400		104,000
Total liabilities and equity	$375,100		$272,000

Additional Information:

1. Net income for 2019 was $58,400.
2. Cash dividends of $25,000 were declared and paid during 2019.
3. During 2019, Beckwith issued $50,000 of notes payable and repaid $35,000 principal relating to notes payable.
4. Common stock was issued for $50,000 cash.
5. Depreciation expense was $18,650, and there were no disposals of equipment.

Required:

1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2019. Use a minus sign to indicate any decreases in cash or cash outflows.

Beckwith Products Company
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities:
Net income		$fill in the blank e34b3e0bafd0fdb_2
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$fill in the blank e34b3e0bafd0fdb_4
Decrease in accounts receivable	fill in the blank e34b3e0bafd0fdb_6
Increase in inventory	fill in the blank e34b3e0bafd0fdb_8
Increase in accounts payable	fill in the blank e34b3e0bafd0fdb_10
Increase in interest payable	fill in the blank e34b3e0bafd0fdb_12
Decrease in wages payable	fill in the blank e34b3e0bafd0fdb_14	fill in the blank e34b3e0bafd0fdb_15
Net cash provided by operating activities			$fill in the blank e34b3e0bafd0fdb_16
Cash flows from investing activities:
Equipment purchase		$fill in the blank e34b3e0bafd0fdb_18
Net cash used for investing activities			fill in the blank e34b3e0bafd0fdb_19
Cash flows from financing activities:
Cash received from issuance of notes		$fill in the blank e34b3e0bafd0fdb_21
Repayment of long-term liabilities		fill in the blank e34b3e0bafd0fdb_23
Cash received from stock issue		fill in the blank e34b3e0bafd0fdb_25
Payment of dividends		fill in the blank e34b3e0bafd0fdb_27
Net cash provided by financing activities			fill in the blank e34b3e0bafd0fdb_28
Net increase (decrease) in cash			$fill in the blank e34b3e0bafd0fdb_30
Cash, 1/1/2019			fill in the blank e34b3e0bafd0fdb_31
Cash, 12/31/2019			$fill in the blank e34b3e0bafd0fdb_32

Feedback

1. Use proper form with company name, statement title, and date. Complete three sections for cash flows; operating, investing and financing.
For operating activities, start with net income and consider any noncash items as well as gains or losses. Next, analyze the changes in the balance sheet accounts to determine their effect on cash. (Remember to restate the fundamental accounting equation in terms of changes, separate the cash and noncash assets, and isolate the change in cash.)
Finally, total to determine the net cash flow for operating assets.
For investing activities, analyze the balance sheet changes and additional information for items that may be classified as an investing activity. Make T-accounts for any changes and determine if there was an associated inflow or outflow of cash for each account affected.
For financing activities, analyze the balance sheet changes and additional information for items that may be classified as a financing activity. Make T-accounts for any changes and determine if there was an associated inflow or outflow of cash for each account affected.

2. Compute the following cash-based performance measures:

1. Free cash flow
2. Cash flow adequacy (Note: Assume that the average amount of debt maturing over the next 5 years is $85,000.)

Round ratio to two decimal places. Enter negative values as negative numbers.

Free cash flow	$
Adequacy ratio

Answer 1