5 34 EXERCISE 5 15 2535 minutes a Zubin Mehta Corporation Statement of Cash

5 34 exercise 5 15 2535 minutes a zubin mehta

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5-34 EXERCISE 5-15 (25–35 minutes) (a) Zubin Mehta Corporation Statement of Cash Flows For the Year Ended December 31, 2007 Cash flows from operating activities Net income ...................................................................... $160,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ........................................... $17,000 Loss on sale of investments .............................. 10,000 Decrease in accounts receivable ..................... 5,000 Decrease in current liabilities ............................ (17,000) 15,000 Net cash provided by operating activities ............ 175,000 Cash flows from investing activities Sale of investments ..................................................... 12,000 [($74,000 – $52,000) – $10,000] Purchase of equipment .............................................. (58,000) Net cash used by investing activities .................... (46,000) Cash flows from financing activities Payment of cash dividends ....................................... (30,000) Net increase in cash ........................................................... 99,000 Cash at beginning of year ................................................. 78,000 Cash at end of year ............................................................. $177,000 (b) Free Cash Flow Analysis Net cash provided by operating activities .................. $175,000 Less: Purchase of equipment ........................................ (58,000) Dividends ................................................................... (30,000) Free cash flow ...................................................................... $ 87,000
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5-35 EXERCISE 5-16 (20–25 minutes) (a) Shabbona Corporation Statement of Cash Flows For the Year Ended December 31, 2007 Cash flows from operating activities Net income ........................................................................ $125,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense ............................................ $27,000 Increase in accounts receivable ......................... (16,000) Decrease in inventory ............................................ 9,000 Decrease in accounts payable ............................ (13,000) 7,000 Net cash provided by operating activities ............. 132,000 Cash flows from investing activities Sale of land ....................................................................... 39,000 Purchase of equipment ................................................ (60,000) Net cash used by investing activities ...................... (21,000) Cash flows from financing activities Payment of cash dividends ........................................ (60,000) Net increase in cash ............................................................. 51,000 Cash at beginning of year .................................................. 22,000 Cash at end of year ............................................................... $ 73,000 Noncash investing and financing activities Issued common stock to retire $50,000 of bonds outstanding
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5-36 EXERCISE 5-16 (Continued) (b) Current cash debt coverage ratio = Net cash provided by operating activities = Average current liabilities $132,000 = ($34,000 + $47,000) / 2 = 3.26 to 1 Cash debt coverage ratio = Net cash provided by operating activities Average total liabilities = $184,000 + $247,000 $132,000 ÷ 2 = .61 to 1 Free Cash Flow Analysis Net cash provided by operating activities .............................. $132,000 Less: Purchase of equipment .................................................... (60,000) Dividends ............................................................................... (60,000) Free cash flow .................................................................................. $ 12,000 Shabbona has excellent liquidity. Its financial flexibility is good. It might be noted that it substantially reduced its long-term debt in 2007 which will help its financial flexibility.
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5-37 EXERCISE 5-17 (30–35 minutes) (a) Grant Wood Corporation Statement of Cash Flows For the Year Ended December 31, 2007 Cash flows from operating activities Net income .......................................................................... $55,000 Adjustments to reconcile net income to net cash provided by operating
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  • Summer '15
  • BARBARAHILLGARTNER
  • Balance Sheet, ........., Generally Accepted Accounting Principles

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