FIN200 Week 1 Assignment Cash Flow Preparation

FIN200 Week 1 Assignment Cash Flow Preparation - Operating...

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FIN200 Week 1 Assignment Cash Flow Preparation 2-28 Cash flow provided by operating activities exceeds net income by $270,000. This occurs primarily because we add back amortization of $150,000 and accounts payable increases by $190,000. Thus, the reader of the cash flow statement gets important insights as to how much cash flow was developed from daily operations. 2-29 The buildup in plant and equipment of $400,000 (gross) and $250,000 (net) has been financed, in part, by the large increase in accounts payable (190,000). This is not a very satisfactory situation. Short-term sources of funds can always dry up, while capital asset needs are permanent in nature. The firm may wish to consider more long-term financing, such as a mortgage, to go along with profits, the increase in bonds payable, and the add-back of amortization. Crosby Corporation Statement of Cash Flows For the Year Ended December 31, 2008
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Unformatted text preview: Operating activities: Net Income 160 000 Add items not requiring an outlay of cash: Depreciation 150 000 150 000 Cash flow from operations 310 000 Increase in accounts receivable (50 000) Increase in inventory (20 000) Decrease in prepaid expenses 20 000 Increase in accounts payable 190 000 Decrease in accrued expenses (20 000) Net change in non-cash working capital 120 000 Cash provided by operating activities 430 000 Investing activities: Decrease in investments 10 000 Increase in plant and equipment (400 000) Cash used in investing activities (390 000) Financing activities: Increase in bonds payable 50 000 Preferred stock dividends paid (10 000) Common stock dividends paid (50 000) Cash used in financing activities (10 000) Net increase (decrease) in cash 30 000 Cash, at beginning of year 70 000 Cash, end of year 100 000...
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