FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Preparing the Statement of Cash Flows

The comparative balance sheets for Beckwith Products Company are presented below.

  2019   2018
Assets:      
    Cash $ 36,950   $ 25,000
    Accounts receivable 75,100   78,000
    Inventory 45,300   36,000
    Property, plant, and equipment 256,400   153,000
    Accumulated depreciation 38,650   20,000
Total assets $ 375,100   $ 272,000
Liabilities and Equity:      
    Accounts payable $ 13,100   $ 11,000
    Interest payable 11,500   8,000
    Wages payable 8,100   9,000
    Notes payable 103,200   90,000
    Common stock 88,600   50,000
    Retained earnings 150,600   104,000
Total liabilities and equity $375,100   $ 272,000

Additional Information:

  1. Net income for 2019 was $58,400.
  2. Cash dividends of $11,800 were declared and paid during 2019.
  3. During 2019, Beckwith issued $50,000 of notes payable and repaid $35,000 principal relating to notes payable.
  4. Common stock was issued for $38,600 cash.
  5. Depreciation expense was $16,850, and there were no disposals of equipment.

Required:

1.  Prepare a statement of cash flows (indirect method) for Beckwith Products for 2019. Use a minus sign to indicate any decreases in cash or cash outflows.

**Cash Flows Statement**

**Cash flows from operating activities:**

- **Net income:** $58,400

**Adjustments to reconcile net income to net cash flow from operating activities:**
- **Depreciation expense:** $16,850
- **Decrease in accounts receivable:** $2,900
- **Increase in inventory:** \(-$9,300\)
- **Increase in accounts payable:** $2,100
- **Increase in interest payable:** $3,500
- **Decrease in wages payable:** \(-$900\)

**Net cash provided by operating activities:** $73,550

**Cash flows from investing activities:**

- **Equipment purchase:** \(-$103,400\)

**Net cash used for investing activities:** \(-$29,850\)

**Cash flows from financing activities:**

- **Cash received from issuance notes:** $50,000
- **Repayment of long-term liabilities:** \(-$35,000\)
- **Cash received from stock issue:** $38,600
- **Payment of dividends:** \(-$11,800\)

**Net cash provided by financing activities:** $41,800
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Transcribed Image Text:**Cash Flows Statement** **Cash flows from operating activities:** - **Net income:** $58,400 **Adjustments to reconcile net income to net cash flow from operating activities:** - **Depreciation expense:** $16,850 - **Decrease in accounts receivable:** $2,900 - **Increase in inventory:** \(-$9,300\) - **Increase in accounts payable:** $2,100 - **Increase in interest payable:** $3,500 - **Decrease in wages payable:** \(-$900\) **Net cash provided by operating activities:** $73,550 **Cash flows from investing activities:** - **Equipment purchase:** \(-$103,400\) **Net cash used for investing activities:** \(-$29,850\) **Cash flows from financing activities:** - **Cash received from issuance notes:** $50,000 - **Repayment of long-term liabilities:** \(-$35,000\) - **Cash received from stock issue:** $38,600 - **Payment of dividends:** \(-$11,800\) **Net cash provided by financing activities:** $41,800
**Net Cash Provided by Financing Activities**

- **Net Change in Cash**

  - Cash, 1/1/2019: $__________
  - Cash, 12/31/2019: $25,000
  - Net change in cash: $41,800

**2. Compute the Following Cash-Based Performance Measures:**

a. **Free Cash Flow**

b. **Cash Flow Adequacy** 

   (*Note: Assume that the average amount of debt maturing over the next 5 years is $85,000.*)

   - Use two decimal places for the adequacy ratio. Enter negative values as negative numbers.

   - Free cash flow: $__________

   - Adequacy ratio: __________
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Transcribed Image Text:**Net Cash Provided by Financing Activities** - **Net Change in Cash** - Cash, 1/1/2019: $__________ - Cash, 12/31/2019: $25,000 - Net change in cash: $41,800 **2. Compute the Following Cash-Based Performance Measures:** a. **Free Cash Flow** b. **Cash Flow Adequacy** (*Note: Assume that the average amount of debt maturing over the next 5 years is $85,000.*) - Use two decimal places for the adequacy ratio. Enter negative values as negative numbers. - Free cash flow: $__________ - Adequacy ratio: __________
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