Data for Rocastle Company are presented in P17 7B. Further analysis reveals the following.
1. Accounts payable pertains to merchandise creditors.
2. All operating expenses except for depreciation are paid in cash.
Instructions
(a) Prepare a statement of cash flows using the direct method.
(b) Compute free cash flow.
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MINNIE HOOPER COMPANY |
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Comparative Balance Sheets |
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December 31 |
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Assets |
2012 |
2011 |
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Cash |
$102,700 |
$ 33,400 |
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Accounts receivable |
60,800 |
37,000 |
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Inventory |
126,900 |
102,650 |
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Investments |
79,500 |
107,000 |
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Plant assets |
315,000 |
205,000 |
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Accumulated depreciation |
(44,500) |
(40,000) |
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Total |
$640,400 |
$445,050 |
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Liabilities and Stockholders’ Equity |
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Accounts payable |
$ 57,700 |
$ 48,280 |
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Accrued expenses payable |
15,100 |
18,830 |
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Bonds payable |
145,000 |
70,000 |
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Common stock |
250,000 |
200,000 |
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Retained earnings |
172,600 |
107,940 |
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Total |
$640,400 |
$445,050 |
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MINNIE HOOPER COMPANY |
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Income Statement |
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For the Year Ended December 31, 2012 |
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Sales revenue |
$297,500 |
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Gain on sale of plant assets |
5,000 |
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Less: |
302,500 |
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Cost of goods sold |
$99,460 |
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Operating expenses, excluding |
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depreciation expense |
19,670 |
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Depreciation expense |
30,500 |
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Income taxes |
37,270 |
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Interest expense |
2,940 |
189,840 |
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Net income |
$112,660 |
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Additional information:
1. New plant assets costing $146,000 were purchased for cash during the year.
2. Investments were sold at cost.
3. Plant assets costing $36,000 were sold for $15,000, resulting in a gain of $5,000.
4. A cash dividend of $48,000 was declared and paid during the year.
Instructions
Prepare a statement of cash flows using the indirect method.