Assament 5.3 Preparing and analyzing a statement of cash flows Allen Company produces roofing supplies and insulation materials for use in home and commercial construction. Although Allen has been growing, recent lack of production capacity has caused production delays, some stockouts of finished goods, and a shift in the inventory mix from finished goods to raw materials and work in process. Allen Company's comparative balance sheet data and additional information follow (note that 2012 is the year listed first in the presentation): Allen Company comparative balance sheet 2012 2011 Assets Cash Accounts receivable, net $108,000 320,000 $60,0007 235,000 (Continued) 118 CORPORATE FINANCIAL REPORTING AND ANALYS 2012 Allen Company comparative balance sheet 2011 510,000 30,000 450,000 27,000 Inventory Prepaid expenses Total current assets Investments in affiliates Property, plant, and equipment Less accumulated depreciation Intangible assets 905,000 200,000 1,100,000 (440,000) 35,000 $1,800,000 were received from affiliates. Remaining changes in the account relate to additional + Less efficient equipment with an original cost of $200 000 was sold during the year Cash dividends of $12.000 were declared and paid during the year. The companya the shares. The company paid $70 000 (which was the original issue price of the shares The company repurchased the stock of a dissident shareholder during the year and retired 835,000 100,000 950,000 (370,000 45,000 $1,560,000 Total assets Liabilities and shareholders' equity $554,000 $400,000 151 Accounts payable 36,000 38,000 2 Accrued liabilities 590,000 438,000 Total current liabilities 380,000 100,000 Long-term notes payable Contributed capital 710,000 750,000 Retained earnings 120,000 272,000 Total liabilities and shareholders' equity $1,800,000 $1,560,000 The following additional information is available: The company's stock has no par or stated value. Contributed capital is shown as c amount i.e., no distinction between common stock and capital in excess of par Net loss for the year was $110 000 The intangible assets have limited lives and were amortized by $10.000 during the year Investment in affiliates represents equity method investments. The income state ment reported S80 000 income from equity method investments. $10 000 dividene investments $40 000. The accumulated depreciation on that equipment was $130 000 declared and distributed a $30 000 stock dividend during the year. . No long-term notes were retired during the year. 22 Required (a) Prepare a statement of cash flows for 2012. (b) Discuss the relationship between net income and cash flow from operations and the relationship among cash flow from operating, investing, and financing activities during the two years. Be as specific as the data allow. (c) Identify two conditions in the operating section of the statement which point to the possibility that cash flow from operations might decline next year. 5.3 Preparing and analyzing a statement of cash flows Allen Company produces roofing supplies and insulation materials for use in home and commercial construction. Although Allen has been growing, recent lack of production capacity has caused production delays, some stockouts of finished goods, and a shift in the inventory mix from finished goods to raw materials and work in process. Allen Company's comparative balance sheet data and additional information follow (note that 2012 is the year listed first in the presentation): Allen Company comparative balance sheet 2012 2011 Assets Cash Accounts receivable, net $108,000 320,000 $60,0007 235,000 (Continued) -80, 48,ou the shares. The company paid $70 000 (which was the original issue price of the shares 118 CORPORATE FINANCIAL REPORTING AND ANALYS Allen Company comparative balance sheet 450,000 27,000 510,000 30,000 were received from affiliates. Remaining changes in the account relate to additional + Less efficient equipment with an original cost of $200 000 was sold during the year for Cash dividends of $12 000 were declared and paid during the year. The company also The company repurchased the stock of a dissident shareholder during the year and retired 2012 2011 Inventory Prepaid expenses 905,000 835,000 Total current assets 200,000 100,000 Investments in affiliates 1,100,000 950,000 Property, plant, and equipment 1440,000) (370,000 Less accumulated depreciation 35,000 45.000 Intangible assets $1,800,000 $1,560,000 Total assets Liabilities and shareholders' equity $554 000 $400.000 154 Accounts payable Accrued liabilities 36,000 38,000 2 Total current liabilities 590,000 438,000 Long-term notes payable 380,000 100,000 Contributed capital 710,000 750,000 Retained earnings 120,000 272,000 Total liabilities and shareholders' equity $1,800,000 $1,560,000 The following additional information is available: The company's stock has no par or stated value. Contributed capital is shown as c amount (i.e., no distinction between common stock and capital in excess of parl Net loss for the year was $110 000 The intangible assets have limited lives and were amortized by $10.000 during the year Investment in affiliates represents equity method investments. The income state ment reported S80 000 income from equity method investments. $10 000 dividene investments $40 000. The accumulated depreciation on that equipment was $130 000 declared and distributed a $30 000 stock dividend during the year. . No long-term notes were retired during the year. 22 Required (a) Prepare a statement of cash flows for 2012. (b) Discuss the relationship between net income and cash flow from operations and the relationship among cash flow from operating, investing, and financing activities during the two years. Be as specific as the data allow. (c) Identify two conditions in the operating section of the statement which point to the possibility that cash flow from operations might decline next year