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b) Compute free cash flow.

b) Compute free cash flow.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 3. Prepare a statement of cash flows--indirect method Presented below are the financial statements of Warner Company. WARNER COMPANY Comparative Balance Sheet December 31 Assets 2022 2023 Cash $35,000 $20,000 (6,000) (8,000) Accounts receivable 20,000 14,000 Inventory 28,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (32,000) (24,000) Total $111,000 $108,000 Liabilities and Stockholders' Eguity Accounts payable $19,000 $15,000 (4,000) Income taxes payable 7,000 8,000 1,000 Bonds payable 17,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $111,000 $108,000 WARNER COMPANY Income Statement For the Year Ended December 31, 2022 Sales Revenue $242,000 Cost of goods sold 175,000 Gross profit 67,000 Selling expenses $18,000 Administrative expenses 6,000 24,000 Income from operations 43,000 Interest expense 3,000 Income before income taxes 40,000 Income tax expense 8,000 Net income $32,000 Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000.
Transcribed Image Text:Problem 3. Prepare a statement of cash flows--indirect method Presented below are the financial statements of Warner Company. WARNER COMPANY Comparative Balance Sheet December 31 Assets 2022 2023 Cash $35,000 $20,000 (6,000) (8,000) Accounts receivable 20,000 14,000 Inventory 28,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (32,000) (24,000) Total $111,000 $108,000 Liabilities and Stockholders' Eguity Accounts payable $19,000 $15,000 (4,000) Income taxes payable 7,000 8,000 1,000 Bonds payable 17,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $111,000 $108,000 WARNER COMPANY Income Statement For the Year Ended December 31, 2022 Sales Revenue $242,000 Cost of goods sold 175,000 Gross profit 67,000 Selling expenses $18,000 Administrative expenses 6,000 24,000 Income from operations 43,000 Interest expense 3,000 Income before income taxes 40,000 Income tax expense 8,000 Net income $32,000 Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000.
(a) Prepare a statement of cash flows using the indirect method. Cash from operating activities Net income Adjustments to reconcile net income provided by operating activities: 32,000 Depreciation expense Decrease in Accounts receivable Decrease in Inventory Decrease in Accounts Payable Increase in income taxes payable Net cash provided by operating activities 17,500 6,000 8,000 (4,000) 1,000 28,500 60,500 Cash flow from investing activities Sale of equipment Net cash used by investing activities 8,500 8,500 Cash flow from financing activities Sale of Common Stock Payment of Dividends Net cash provided/used by Financing Activities Net decrease in cash Cash at beginning period Cash at the end of period 15,000 35,000 20,000 b) Compute free cash flow.
Transcribed Image Text:(a) Prepare a statement of cash flows using the indirect method. Cash from operating activities Net income Adjustments to reconcile net income provided by operating activities: 32,000 Depreciation expense Decrease in Accounts receivable Decrease in Inventory Decrease in Accounts Payable Increase in income taxes payable Net cash provided by operating activities 17,500 6,000 8,000 (4,000) 1,000 28,500 60,500 Cash flow from investing activities Sale of equipment Net cash used by investing activities 8,500 8,500 Cash flow from financing activities Sale of Common Stock Payment of Dividends Net cash provided/used by Financing Activities Net decrease in cash Cash at beginning period Cash at the end of period 15,000 35,000 20,000 b) Compute free cash flow.
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