2-7A. (Measuring cash flows) Calculate the free cash flows for Abrams Manufacturing Company for the year ended December 31, 2003, both from an asset and a financing perspective. Interpret your results.

.Additional information:
The firm paid $22,000 in common stock dividends during 2003.ı

Transcribed Image Text:

Abrams Manufacturing Balance Sheets at 12/31/2002 and 12/31/2003 Cash 2002 $ 89,000 2003 $100,000 Accounts receivable Inventory Prepaid expenses Plant and equipment Accumulated depreciation Total Accounts payable Accrued liabilities Mortgage payable Preferred stock Common stock Retained earnings Total liabilities Et equity 64,000 70,000 112,000 100,000 10,000 10,000 2:38,000 (40,000) $473,000 $ 85,000 68,000 70,000 311,000 (66,000) $525,000 $ 90,000 63,000 0 0 120,000 205,000 205,000 45,000 47,000 $473,000 $525,000 Abrams Manufacturing Company Income Statement for the Year Ended 12/31/03 Sales Cost of sales $184,000 60,000 Gross profit Depreciation expense Operating income 124,000 Selling, general, and administrative expenses 44,000 26,000 $ 54,000 Interest expense 4,000 16,000 Taxes Preferred stock dividends Net income 10,000 $ 24,000