Homework SourseComparative financial statement data for Carmono Company fol
Comparative financial statement data for Carmono Company follow:
For this year, the company reported net income as follows:
This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.
Required:
1. Using the indirect method, prepare a statement of cash flows for this year.
2. Compute Carmono’s free cash flow for this year.
| This Year | Last Year | ||||
| Assets | |||||
| Cash | $ | 14.50 | $ | 28.00 | |
| Accounts receivable | 78.00 | 71.00 | |||
| Inventory | 127.50 | 115.60 | |||
| Total current assets | 220.00 | 214.60 | |||
| Property, plant, and equipment | 273.00 | 222.00 | |||
| Less accumulated depreciation | 56.80 | 42.60 | |||
| Net property, plant, and equipment | 216.20 | 179.40 | |||
| Total assets | $ | 436.20 | $ | 394.00 | |
| Liabilities and Stockholders’ Equity | |||||
| Accounts payable | $ | 76.50 | $ | 60.00 | |
| Common stock | 174.00 | 133.00 | |||
| Retained earnings | 185.70 | 201.00 | |||
| Total liabilities and stockholders’ equity | $ | 436.20 | $ | 394.00 | |
Solution
1. Using the indirect method, prepare a statement of cash flows for this year.
2. Compute Carmono’s free cash flow for this year.
Free cash flow = Cash flow from operating activities-purchase of property, plant & Equipment
= 31.80-51
Free cash flow = -19.2
| Cash flow from operating activities | ||
| Net income | 20 | |
| Adjustment to reconcile net income | ||
| Increase account receivable | (7) | |
| Increase inventory | (11.90) | |
| Increase account payable | 16.50 | |
| Depreciation | 14.2 | |
| Net cash flow from operating activities | 31.80 | |
| cash flow from investing activities | ||
| Purchase of property, plant and equipment | (51) | |
| Net cash flow from investing activities | (51) | |
| Cash flow from financing activities | ||
| Issue common stock | 41 | |
| Dividend paid | (35.30) | |
| Net cash flow from financing activities | 5.70 | |
| Net cash flow | (13.50) | |
| Beginning cash | 28 | |
| Ending cash | 14.50 | |
