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Exercise 5-18 (Part Level Submission) The comparative balance sheets of Pina Corporation at the beginning and...

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
BALANCE SHEETS

Dec. 31, 2017

Jan. 1, 2017

Inc./Dec.
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).)

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago
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