This exercise will provide you with an opportunity to prepare a statement of cash flows. A comparative balance sheet for Hernan Perez Pictures appears below:
|
December-31 |
|||
|
Assets |
2014 |
2013 |
Change |
|
Cash |
$81,000 |
$35,000 |
$46,000 |
|
Accounts receivable |
65000 |
50000 |
15000 |
|
Inventory |
155,000 |
96,000 |
59,000 |
|
Investments |
100.000 |
70.000 |
30.000 |
|
Equipment |
170.000 |
100.000 |
70.000 |
|
Accumulated depreciation |
(31,000) |
(20,000) |
(11,000) |
|
$540.000 |
$331.000 |
$209.000 |
|
|
Liabilities and Stockholders” Equity |
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|
Accounts payable |
$31,000 |
$40,000 |
$(9,000) |
|
Long-term note payable |
12,00U |
bU,000 |
12,000 |
|
Bonds payable |
100,000 |
0 |
100,000 |
|
Common stock, no par |
250,000 |
200,000 |
50,000 |
|
Retained earnings |
87.000 |
31.000 |
56.000 |
|
$540.000 |
$331.000 |
$209.000 |
|
Additional information:
- New equipment costing $80,000 was purchased for cash.
- Old equipment was sold at a loss of $4,500.
- Bonds were issued for cash.
- An investment costing $30,000 was acquired by issuing a long-term note payable.
- Cash dividends of $14,000 were declared and paid during the year.
- Depreciation expense for 2014 was $15,000.
- Accounts Payable relate to operating expenses.
- Stock investments are classified as available-for-sale securities.
- Net sales for 2014 were $80,000.
Instructions
(a) Prepare a statement of cash flows for 2014 using the indirect method.
(b) Compute the amount of free cash flow for 2014.