Question

Problem 12-7A (Part Level Submission)

Presented below are the financial statements of Blossom Company.

Blossom Company Comparative Balance Sheets December 31
Assets		2017			2016
Cash		$ 76,650			$ 43,800
Accounts receivable		43,800			30,660
Inventory		61,320			43,800
Property, plant, and equipment		131,400			170,820
Accumulated depreciation		(70,080	)		(52,560	)
Total		$243,090			$236,520
Liabilities and Stockholders’ Equity
Accounts payable		$ 41,610			$ 32,850
Income taxes payable		15,330			17,520
Bonds payable		37,230			72,270
Common stock		39,420			30,660
Retained earnings		109,500			83,220
Total		$243,090			$236,520

Blossom Company Income Statement For the Year Ended December 31, 2017
Sales revenue				$529,980
Cost of goods sold				383,250
Gross profit				146,730
Selling expenses		$39,420
Administrative expenses		13,140		52,560
Income from operations				94,170
Interest expense				6,570
Income before income taxes				87,600
Income tax expense				17,520
Net income				$ 70,080

Additional data:

1.		Depreciation expense was $38,325.
2.		Dividends declared and paid were $43,800.
3.		During the year equipment was sold for $18,615 cash. This equipment cost $39,420 originally and had accumulated depreciation of $20,805 at the time of sale.

Compute free cash flow. (Show a negative free cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Answer- Free cash flow =$40515

Explanation- Free cash flow = Net cash provided by operating activities- Capital expenditure-Cash dividends paid

= $84315-$0-$43800

= $40515

Where-

BLOSSOM COMPANY
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,2017
Particulars		Amount
		$
Cash flow from operating activities
Net Income		70080
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expense		38325
Change in operating assets & liabilities
Increase in accounts receivable		-13140
Increase in inventories		-17520
Increase in accounts payable		8760
Decrease in income tax payable		-2190
Net cash flow from operating activities (a)		84315
Cash Flow from Investing activities
Equipment sold		18615
Net cash Flow from Investing activities (b)		18615
Cash Flow from Financing activities
Cash dividends paid		-43800
Common stock issued		8760
Bonds payable paid		-35040
Net cash Flow from Financing activities (c)		-70080
Net Change in cash c=a+b+c		32850
Beginning cash balance		43800
Closing cash balance		76650