FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows fro…
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the …
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It…
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expect…
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Question

1. What is the cash flow statement using the indirect method? 

2. What is the free cash flow for this year? 

Comparative financial statement data for Carmono Company follow: This Year Last Year Assets Cash $ 8.50 $ 16.00 Accounts receivable 54.00 47.00 Inventory 97.50 84.40 Total current assets 160.00 147.40 Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment 237.00 198.00 47.20 35.40 189.80 162.60 Total assets $ 349.80 $ 310.00 Liabilities and Stockholders' Equity Accounts payable $ 58.50 48.00 Common stock 126.00 97.00 Retained earnings 165.30 165.00 Total liabilities and stockholders' equity $ 349.80 $ 310.00 For this year, the company reported net income as follows: Sales $950.00 Cost of goods sold Gross margin Selling and administrative expenses_ 360.00 570.00 380.00 Net income $ 20.00 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.
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Transcribed Image Text:Comparative financial statement data for Carmono Company follow: This Year Last Year Assets Cash $ 8.50 $ 16.00 Accounts receivable 54.00 47.00 Inventory 97.50 84.40 Total current assets 160.00 147.40 Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment 237.00 198.00 47.20 35.40 189.80 162.60 Total assets $ 349.80 $ 310.00 Liabilities and Stockholders' Equity Accounts payable $ 58.50 48.00 Common stock 126.00 97.00 Retained earnings 165.30 165.00 Total liabilities and stockholders' equity $ 349.80 $ 310.00 For this year, the company reported net income as follows: Sales $950.00 Cost of goods sold Gross margin Selling and administrative expenses_ 360.00 570.00 380.00 Net income $ 20.00 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.
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