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 8 months ago

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