EXERCISE 7–1 Refer to the financial statements of Campbell Soup Company in Appendix A.

Required:

a. How much cash does Campbell Soup collect from customers during Year 10? (Hint: Use the statement of cash flows to derive the beginning balance of receivables.)

b. How much is paid in cash dividends on common stock during Year 11?

c. How much is the total cost of goods and services produced and otherwise generated in Year 11? Consider all inventories.

d. How much is the deferred tax provision for Year 11? What effect did it have on current liabilities?

e. What effect does Year 11 depreciation expense have on cash from operations?

f. Why are the “Divestitures & restructuring” provisions in the statement of cash flows for Year 10 added back to net income in arriving at cash from operations?

g. What does the adjustment “Effect of exchange rate changes on cash” represent?

h. Note 1 to the financial statements discusses the accounting for disposal of property. Where is the adjustment for any gain or loss reported in the statement of cash flows?

i. Compute free cash flows for all years shown.

j. Campbell is an established manufacturer. How would you expect the free cash flows of a start-up competitor in this industry to differ from Campbell?

k. If Campbell launched a new product line in Year 12, how would you expect the three sections of the statement of cash flows to be affected?