1. Apex Company prepared the statement of cash flows for the current year that is shown below: Apex Company Statement of Cash FlowsIndirect Method Operating activities: Net income $ 41,200 Adjustments to convert net income to cash basis: Depreciation $ 20,800 Increase in accounts receivable (61,700) Increase in inventory (25,900) Decrease in prepaid expenses 9,900 Increase in accounts payable 53,000 Decrease in accrued liabilities (10,800) Increase in income taxes payable 4,000 (10,700) Net cash provided by (used in) operating activities 30,500 Investing activities: Proceeds from the sale of equipment 14,700 Loan to Thomas Company (40,600) Additions to plant and equipment (120,700) Net cash provided by (used in) investing activities (146,600) Financing activities: Increase in bonds payable 89,300 Increase in common stock 39,200 Cash dividends (28,600) Net cash provided by (used in) financing activities 99,900 Net decrease in cash and cash equivalents (16,200) Beginning cash and cash equivalents 28,200 Ending cash and cash equivalents $ 12,000 Required: Compute Apex Companys free cash flow for the current year.

2.

The following changes took place last year in Pavolik Companys balance sheet accounts:

Asset and Contra-Asset Accounts			Liabilities and Stockholders' Equity Accounts
Cash	$ 25	D	Accounts payable	$ 77	I
Accounts receivable	$ 29	I	Accrued liabilities	$ 29	D
Inventory	$ 68	D	Income taxes payable	$ 34	I
Prepaid expenses	$ 24	I	Bonds payable	$ 244	I
Long-term investments	$ 26	D	Common stock	$ 116	D
Property, plant, and equipment	$ 470	I	Retained earnings	$ 97	I
Accumulated depreciation	$ 97	I

D = Decrease; I = Increase.

Long-term investments that cost the company $26 were sold during the year for $56 and land that cost $55 was sold for $29. In addition, the company declared and paid $23 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock.

The companys income statement for the year follows:

Sales		$ 1,170
Cost of goods sold		516
Gross margin		654
Selling and administrative expenses		470
Net operating income		184
Nonoperating items:
Loss on sale of land	$ (26)
Gain on sale of investments	30	4
Income before taxes		188
Income taxes		68
Net income		$ 120

The companys beginning cash balance was $138 and its ending balance was $113.

Required:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

Use the indirect method to determine the net cash provided by operating activities for the year. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

Pavolik Company
Statement of Cash Flows (partial)
		0
		$0

2. Prepare a statement of cash flows for the year.

Pavolik Company
Statement of Cash Flows
Operating activities:
Investing activities:
		0
Financing activities:
		0
		0
Beginning cash and cash equivalents
Ending cash and cash equivalents		$0

3.

Comparative financial statement data for Carmono Company follow:

	This Year	Last Year
Assets
Cash	$ 14.50	$ 28.00
Accounts receivable	78.00	71.00
Inventory	127.50	115.60
Total current assets	220.00	214.60
Property, plant, and equipment	273.00	222.00
Less accumulated depreciation	56.80	42.60
Net property, plant, and equipment	216.20	179.40
Total assets	$ 436.20	$ 394.00
Liabilities and Stockholders Equity
Accounts payable	$ 76.50	$ 60.00
Common stock	174.00	133.00
Retained earnings	185.70	201.00
Total liabilities and stockholders equity	$ 436.20	$ 394.00

For this year, the company reported net income as follows:

Sales	$ 1,550.00
Cost of goods sold	930.00
Gross margin	620.00
Selling and administrative expenses	600.00
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 Carmonos free cash flow for this year.