2-6A. (Measuring cash flows) Calculate the free cash flows for T. P. Jarmon Company for the year ended December 31, 2003, both from an asset and a financing perspective. Interpret your results. T. P. Jarmon Company Balance Sheets at 12/31/02 and 12/31/03 ASSETS 2002 2003 $ 15,000 $ 14,000 Cash Marketable securities Accounts receivable 6,000 6,200 42,000 33,000 84,000 Inventory Prepaid rent Total current assets 51,000 1,200 $115,200 286,000 $401,200 1,100 $138,300 Net plant and equipment Total assets 270,000 $408,300 LIABILITIES AND EQUITY 2002 2003 $ 57,000 13,000 $ 48,000 15,000 6,000 $ 69,000 $160,000 $172,200 $401,200 Accounts payable Nates payable Accruals Total current liabilities 5,000 $ 75,000 $150,000 $183,300 Long-term debt Common stockholders' equity Total liabilities and equity $408,300 T. P. Jarmon Company Income Statement for the Year Ended 12/31/03 Sales $600,000 460,000 $140,000 Less: cost of goods sold Gross profits Less: expenses General and administrative $30,000 Interest Depreciation Total operating expenses Earnings before taxes Less: taxes Net income 10,000 30,000 $ 70,000 $ 70,000 27,100 $ 42,900 $ 42,900 31,800 $ 11,100 Net income Less: cash dividends To retained earnings 2-6A. (Measuring cash flows) Calculate the free cash flows for T. P. Jarmon Company for the year ended December 31, 2003, both from an asset and a financing perspective. Interpret your results. T. P. Jarmon Company Balance Sheets at 12/31/02 and 12/31/03 ASSETS 2002 2003 $ 15,000 $ 14,000 Cash Marketable securities Accounts receivable 6,000 6,200 42,000 33,000 84,000 Inventory Prepaid rent Total current assets 51,000 1,200 $115,200 286,000 $401,200 1,100 $138,300 Net plant and equipment Total assets 270,000 $408,300 LIABILITIES AND EQUITY 2002 2003 $ 57,000 13,000 $ 48,000 15,000 6,000 $ 69,000 $160,000 $172,200 $401,200 Accounts payable Nates payable Accruals Total current liabilities 5,000 $ 75,000 $150,000 $183,300 Long-term debt Common stockholders' equity Total liabilities and equity $408,300 T. P. Jarmon Company Income Statement for the Year Ended 12/31/03 Sales $600,000 460,000 $140,000 Less: cost of goods sold Gross profits Less: expenses General and administrative $30,000 Interest Depreciation Total operating expenses Earnings before taxes Less: taxes Net income 10,000 30,000 $ 70,000 $ 70,000 27,100 $ 42,900 $ 42,900 31,800 $ 11,100 Net income Less: cash dividends To retained earnings
