Question

In: Accounting

Rodriquez Corporation’s comparative balance sheets are presented below.

Rodriquez Corporation’s comparative balance sheets are presented below.

RODRIQUEZ CORPORATION Comparative Balance Sheets December 31 2017 2016 $ 15,200 25,200 20,000 60,000 (14,000) $ 17,700 22,300 16,000 70,000 (10,000) Cash Accounts receivable Investments Equipment Accumulated depreciation-equipment Total $106,400 $116,000

 

 

Additional information:

1. Net income was $18,300. Dividends declared and paid were $16,400.

2. Equipment which cost $10,000 and had accumulated depreciation of $1,200 was sold for $3,300.

3. No noncash investing and financing activities occurred during 2017.

 

Instructions

(a) Prepare a statement of cash flows for 2017 using the indirect method.

(b) Compute free cash flow.

Solutions

Expert Solution

a.

Rodriquez Corporation

Statement of Cash Flows 

For the year ended December 31, 2017 (Amounts in $)

Cash Flows from Operating Activities    
Net Income   18,300
Adjustments to reconcile net income cash flow from operating activities    
Add: Depreciation Expense ($14,000 End. Accum. Dep. Bal.+$1,200Accum. Dep. on Equipment sold- $10,000 Beg. Accum. Dep. Bal.) 5,200  
Add: Loss on Sale of Equipment [($10,000 cost - $1,200 Accum. Dep.) - $3,300 Sale Price] 5,500  
Less: Increase in Accounts Receivable ($25,200 - $22,300) (2,900)  
Add: Increase in Accounts Payable ($14,600 - $11,100) 3,500  
Total of Adjustments   11,300
Net Cash provided by Operating Activities (A)   29,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b.

Cash Flows from Investing Activities    
Sale of Equipment 3,300  
Purchase of Investments ($20,000 - $16,000) (4,000)  
Net Cash used in Investing Activities (B)   (700)
Cash Flows from Financing Activities    
Repayments of Bonds ($30,000 - $10,000) (20,000)  
Issue of Common Stock ($50,000 - $45,000) 5,000  
Dividends paid (16,400)  
Net Cash used in Financing Activities (C)   (31,400)
Net Increase/(Decrease) in Cash (A+B+C)   (2,500)
Add: Beginning Cash Balance   17,700
Ending Cash Balance   15,200

a.

Rodriquez Corporation

Statement of Cash Flows 

For the year ended December 31, 2017 (Amounts in $)

Cash Flows from Operating Activities    
Net Income   18,300
Adjustments to reconcile net income cash flow from operating activities    

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