Exercise 14-3 Calculating Free Cash Flow

Special instructions: The equation for Free Cash Flow is found on page 703 of your text. Complete this exercise on this document. There is space after the requirement.

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		$40,000
Adjustments to convert net income to cash basis:
Depreciation	$22,000
Increase in accounts receivable	(60,000)
Increase in inventory	(25,000)
Decrease in prepaid expenses	9,000
Increase in accounts payable	55,000
Decrease in accrued liabilities	(12,000)
Increase in income taxes payable	5,000	(6,000)
Net cash provided by (used in) operating activities		34,000
Investing activities
Proceeds from the sale of equipment	14,000
Loan to Thomas Company	(40,000)
Additions to plant and equipment	(110,000)
Net cash provided by (used in) investing activities		(136,000)
Financing activities
Increase in bonds payable	90,000
Increase in common stock	40,000
Cash dividends	(30,000)
Net cash provided by (used in) financing activities		100,000
Net decrease in cash and cash equivalents		(2,000)
Beginning cash and cash equivalents		27,000
Ending cash and cash equivalents		$25,000