| Problem 2: Cash Flow Statement | ||
| The comparative Balance Sheet and Income Statement appears below in condensed form: | ||
| BILLS MOTORS, INC. | ||
| BALANCE SHEET | 2003 | 2002 |
| Cash | $ 105,500 | $ 44,300 |
| Accounts Receivable | 65,000 | 71,000 |
| Merchandise Inventory | 163,400 | 155,700 |
| Investments | 0 | 60,000 |
| Equipment | 508,100 | 400,000 |
| Accumulated Depreciation Equipment | (138,000) | (151,000) |
| Total Assets | $ 704,000 | $ 580,000 |
| Accounts Payable | $ 65,600 | $ 48,200 |
| Salaries Payable | 6,200 | 8,000 |
| Bonds Payable | 0 | 75,000 |
| Common Stock, $10 Par | 465,000 | 340,000 |
| Retained Earnings | 167,200 | 108,800 |
| Total Liabilities & Stockholder’s Equity | $ 704,000 | $ 580,000 |
| INCOME STATEMENT | ||
| Sales | $ 549,100 | |
| Cost of Merchandise Sold | (300,000) | |
| Gross Profit | $ 249,100 | |
| Operating Expenses | ||
| Depreciation Expense | 27,000 | |
| Other Operating Expenses | 123,600 | 150,600 |
| Income from Operations | $ 98,500 | |
| Other Income and Expense: | ||
| Gain on Sale of Investment | 3,500 | |
| Interest Expense | (6,600) | (3,100) |
| Net Income | $ 95,400 | |
| Additional Data: | ||
| 1. Fully depreciated equipment with no book value, originally costing $40,000, was scrapped at a junk yard. | ||
| 2. Equipment was purchased for $148,100. | ||
| 3. Bonds Payable for $75,000 were retired by payment at their face value. | ||
| 4. Investments were sold at a gain of $3,500 above cost (book value). | ||
| 5. Cash dividends of $37,000 were declared and paid. | ||
| 6. Common Stock was issued at par value. | ||
| PROBLEM REQUIREMENTS and INSTRUCTIONS: Prepare a Statement of Cash Flows using the Indirect Method. Your statement should be in the proper sequence order, neatly presented, and well defined and labeled as illustrated in the text examples. At the bottom of your statement, calculate the company’s Free Cash Flow. Show your work (calculation) |
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