Accounting (Text Only)
26th Edition
ISBN: 9781285743615
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 16, Problem 16.8BPE
a.
To determine
Free cash flow is defined as an evaluation of financial performance of a company. It shows the cash which is generated after paying on capital expenditures. Such cash is used for production, expansion, development of new products, and acquisitions.
The following formula is used to calculate free cash flow.
D’s free cash flow for both years.
b.
To determine
To Explain: Whether free cash flow has improved or declined from 2015 to 2016.
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Calculate the Cash Flows in the Statement of Cash Flows below from the provided Balance sheet
and Income Statement
BALANCE SHEET (in millions of dollars)
INCOME STATEMENT (in millions of dollars)
2015
2014
2015
2014
Assets
Net sales
$3,000.0 $2,850.0
Cash and equivalents
10 $
80
Operating costs except depreciation and amortizatio
2,616.2
2,497.0
90.0
100.0
Accounts receiva ble
375
315
Depreciation and amortization
$ 283.8 $ 263.0
Inventories
615
415
Earnings before interest and taxes (EBIT)
Total current asse ts
$ 1,000 $
810
Less interest
88.0
60.0
$ 195.8 $ 203.0
Net plant and equipment
1,000
870
Earnings before taxes (EBT)
$ 2,000 1,680
Total assets
Taxes
78.3
81.2
117.5 $ 121.8
Net income
Liabilities and Equity
Common dividends
57.5
53.0
Addition to re tained earnings
Accounts payable
$
$
60 $
30
60.0 $
68.8
Accruals
140
130
Notes payable
110
60
Tax rate
40%
40%
310 $
Total current liabilities
220
Long-term bonds
750
580
$ 1,060 $
Total liabilities
800
Common stock (50,000,000…
Given the information below, determine the free cash flow for 2014.
Income Statement (In Thousands)
Sales
Operating costs
EBITDA
Depreciation
Earnings before interest and taxes
Interest (8%)
Earnings before taxes
Taxes (40%)
Net income
Common dividends
Balance Sheet (In Thousands)
Assets:
Cash and marketable securities
Accounts receivable
Inventories
Total current assets
Net fixed assets (PP&E)
Total assets
Liabilities and equity:
Accounts payable
Notes payable
Accruals
2014
$24,800.00
-$14,880.00
$9,920.00
-$920.00
$9,000.00
-$112.00
$8,888.00
$7.840.00
-$3,555.20 -$3,136.00
$5,332.80 $4,704.00
$2,082.00
$2,352.00
2014
2013
$22,000.00
$13,200.00
$8,800.00
-$800.00
$8,000.00
-$160.00
$1,200.00
$5,565.00
$7.440.00
$14,205.00
$9,200.00
$23,405.00
2013
$1,000.00
$5,000.00
$6,000.00
$12,000.00
$8,000.00
$20,000.00
$6,500.00
$6,000.00
$400.00 $1,000.00
$3.254.20 $3,000.00
In its 2017 annual report, Allen
Company reports the following (in
thousands): 2017 2016 Total revenue
$102,500 $99,400 Property, plant,
equipment, gross 41,300 38,700
Property, plant, equipment, net
16,540 14,905 Depreciation expense
1,935 1,655 If revenue growth is
projected to be 5%, the 2018
forecasted depreciation expense to
be added back on the statement of
cash flows is: A. $1,935 thousand B.
$2,147 thousand C. $1,766 thousand
D. $2,065 thousand E. None of the
above
disregard
Chapter 16 Solutions
Accounting (Text Only)
Ch. 16 - What is the principal disadvantage of the direct...Ch. 16 - Prob. 2DQCh. 16 - A corporation issued 2,000,000 of common stock in...Ch. 16 - A retail business, using the accrual method of...Ch. 16 - Prob. 5DQCh. 16 - A long-term investment in bonds with a cost of...Ch. 16 - A corporation issued 2,000,000 of 20-year bonds...Ch. 16 - Fully depreciated equipment costing 50,000 is...Ch. 16 - Prob. 9DQCh. 16 - Name five common major classes of operating cash...
Ch. 16 - Prob. 16.1APECh. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Prob. 16.2APECh. 16 - Prob. 16.2BPECh. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Prob. 16.4APECh. 16 - Prob. 16.4BPECh. 16 - Prob. 16.5APECh. 16 - Land transactions on the statement of cash flows...Ch. 16 - Prob. 16.6APECh. 16 - Prob. 16.6BPECh. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Prob. 16.8BPECh. 16 - Prob. 16.1EXCh. 16 - Effect of transactions on cash flows State the...Ch. 16 - Prob. 16.3EXCh. 16 - Prob. 16.4EXCh. 16 - Cash flows from operating activities-indirect...Ch. 16 - Prob. 16.6EXCh. 16 - Prob. 16.7EXCh. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Prob. 16.10EXCh. 16 - Reporting land transactions on statement of cash...Ch. 16 - Prob. 16.12EXCh. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Prob. 16.15EXCh. 16 - Prob. 16.16EXCh. 16 - Prob. 16.17EXCh. 16 - Prob. 16.18EXCh. 16 - Prob. 16.19EXCh. 16 - Prob. 16.20EXCh. 16 - Prob. 16.21EXCh. 16 - Prob. 16.22EXCh. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Prob. 16.24EXCh. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Prob. 16.1APRCh. 16 - Statement of cash flowsindirect method The...Ch. 16 - Prob. 16.3APRCh. 16 - Statement of cash flows-direct method The...Ch. 16 - Prob. 16.5APRCh. 16 - Prob. 16.1BPRCh. 16 - Statement of cash flowsindirect method The...Ch. 16 - Prob. 16.3BPRCh. 16 - Statement of cash flows-direct method The...Ch. 16 - Prob. 16.5BPRCh. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...Ch. 16 - Prob. 16.4CP
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