Chapter 11, Problem 16AE

Preparing a statement of cash flows—indirect method (Learning Objective 3) 20-25 min.

The income statement and additional data of Consolidated Services, Inc., follow:

Consolidated Services. Inc. Income Statement Year Ended November 30, 2018
		Revenues:
		Sales Revenue	$304,000
		Dividend Revenue	11,000
		Total Revenues		$315,000
		Expenses:
		Cost of Goods Sold	$103,000
		Salaries Expense	55,000
		Depreciation Expense	28,000
		Advertising Expense	16,000
		Interest Expense	6,000
		Income Tax Expense	9,000
		Total Expenses		217,000
		Net Income		$ 98,000

Additional data:

1. a. Acquisition of fixed assets totaled $117,000. Of this amount, $103,000 was paid in cash; a $14,000 note payable was signed for the remainder.
2. b. Proceeds from a sale of land totaled $22,000. No gain or loss was recognized on the sale.
3. c. Proceeds from issuance of common stock totaled $50,000.
4. d. Payment of long-term note payable was $9,000.
5. e. Payment of dividends was $11,000.
6. f. Data from the comparative balance sheet follow:

November 30	2018	2017
Current Assets:
Cash.............................................................	$85,000	$23,000
Accounts Receivable...................................	52,000	57,000
Inventory......	52,000	40,000
Current Liabilities:
Accounts Payable. .......................................	$41,000	$32000
Accrued Liabilities.......................................	14,000	29,000

Requirements

1. 1. Prepare Consolidated Services’ statement of cash flows for the year ended November 30, 2018, using the indirect method.
2. 2. Calculate Consolidated Services’ free cash flow for the year ended November 30, 2018.
3. 3. Evaluate Consolidated Services’ cash flows for the year. In your evaluation, mention all three categories of cash flows as well as free cash flow and give the reason(s) for your evaluation.

E11-16A Calculating the cash conversion cycle (Learning Objective 5) 5-10 min.

Use the data for Consolidated Services from E11-15A.

Requirements

1. 1. Calculate the cash conversion cycle for Consolidated Services. Round all calculations to two decimal places. Assume all sales are on credit.
2. 2. Comment on Consolidated Services’ cash conversion cycle, assuming it was 92.45 days for the prior year.