June 2012
Beginner
548 pages
15h 16m
English
book
Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition
by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Content preview from Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition
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EXERCISE 13-4
Purpose: (L.O. 3, 4) 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:
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.
TIP: In this exercise, you must analyze the changes in the Retained Earnings account balance to determine the net income figure for 2014.
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