A. Prepare a statement of cash flows for Abrahams Manufacturing Company for the year ended December 31, 2015. Interpret your results.
B. Your interpretation of your cash flow statement should describe the operating, investing and financing activities of Abrahams Manufacturing.
I did some work below all the way in the end but I do not know if it is right and I also need the interpretation.
3-12. (Working with a statement of cash flows) Prepare a statement of cash flows for Abrahams Manufacturing Company for the year ended December 31, 2015. Interpret your results. Abrahams Manufacturing Company Balance Sheet for 12/31/2014 and 12/31/2015 2014 2015 Cash $ 89,000 $100,000 Accounts receivable 64,000 70,000 Inventory 112,000 100,000 Prepaid expenses 10,000 10,000 Total current assets 275,000 280,000 Gross plant and equipment 238,000 311,000 Accumulated depreciation (40,000) (66.000) Total assets $473.000 $525.000 $ 85,000 68,000 153,000 70,000 Accounts payable Accrued liabilities Total current debt Mortgage payable Preferred stock Common stock Retained earnings Total debt and equity $90,000 63.000 153,000 0 120,000 205,000 47.000 $525.000 205,000 45,000 $473.000 Abrahams Manufacturing Company Income Statement for the Year Ended 12/31/2015 2015 Sales $184,000 Cost of goods sold (60,000 Gross profit $124,000 Selling, general, and administrative expenses 44,000 Depreciation expense (26,000) Operating income $ 54,000 Interest expense (4,000) Earnings before taxes $ 50,000 Taxes 16,000 Preferred stock dividends 10,000 Earnings available to common shareholders $ 24,000 Additional Information 1. The only entry in the accumulated depreciation account is for 2015 deprecia- tion. 2. The firm paid $22,000 in common stock dividends during 2015. Problem 3-12 Statement of Cash flows 34,000 26,000 -6,000 12,000 5,000 -5,000 32,000 66,000 Cash flows from operating activities Net Income Adjustments to reconcile (Net income into net cash) Provided by operating activities: Depreciation expense Increase in accounts receivable Decrease in inventory Increase in accounts payable Decrease in accrued liabilities Net cash provided by operating activities Cash flows from investing activities Purchase of plant & equipment Net cash used by investing activities Cash flows from financing activities Repayment of mortgage loan Issuance of preffered stock Preffered dividend paid Common dividend paid Net cash used by financing activities Net increase in cash Cash balance at the beginning of the year Cash balance at the end of the year -73,000 -73,000 -70,000 120,000 -10,000 -22,000 18,000 11,000 89,000 100,000
