In: Accounting
Exercise 5-18 (Part Level Submission)
The comparative balance sheets of Pina Corporation at the beginning and end of the year 2017 appear below.
PINA CORPORATION |
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Dec. 31, 2017 |
Jan. 1, 2017 |
Inc./Dec. |
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Assets | |||||||||
Cash | $21,880 | $15,320 | $6,560 | Inc. | |||||
Accounts receivable | 107,880 | 90,320 | 17,560 | Inc. | |||||
Equipment | 40,880 | 24,320 | 16,560 | Inc. | |||||
Less: Accumulated Depreciation-Equipment | (17,000 | ) | (11,000 | ) | 6,000 | Inc. | |||
Total | $153,640 | $118,960 | |||||||
Liabilities and Stockholders’ Equity | |||||||||
Accounts payable | $21,880 | $17,320 | 4,560 | Inc. | |||||
Common stock | 101,880 | 82,320 | 19,560 | Inc. | |||||
Retained earnings | 29,880 | 19,320 | 10,560 | Inc. | |||||
Total | $153,640 | $118,960 |
Net income of $45,880 was reported, and dividends of $35,320 were
paid in 2017. New equipment was purchased and none was sold.
Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2017, and December 31, 2017. (Round ratios to 1 decimal place., e.g. 4.5.)
Compute free cash flow for the year 2017. (Show
amounts that decrease cash flow with either a - sign e.g. -15,000
or in parenthesis e.g. (15,000).)
1) | Current ratio | |||||||
current assets/current liabilities | ||||||||
2017 | 2017 | |||||||
1-Jan | 31-Dec | |||||||
Current assets | ||||||||
Cash | 15,320 | 21,880 | ||||||
Accounts receivable | 90,320 | 107,880 | ||||||
total current assets | 105,640 | 129,760 | ||||||
total current liabilities | 17,320 | 21,880 | ||||||
current ratio | 6.1 | 5.9 | ||||||
2) | Free cash flow | |||||||
cash from operating activities- capital expenditure - cash dividend | ||||||||
Cash flow from operating activities | ||||||||
net income | 45,880 | |||||||
Adjustments | ||||||||
Depreciation expense | 6,000 | |||||||
increase in accounts receivable | -17,560 | |||||||
increase in accounts payable | 4,560 | |||||||
net cash from operating activities | 38,880 | |||||||
Free cash flow | ||||||||
38,880-16,560-35,320 | ||||||||
-13000 | answer | |||||||