Question
Foxboro Companys income statement for Year 2 follows: Foxboro Company Income Statement Sales $ 704,000 Cost of goods sold 68,000 Gross margin 636,000 Selling and
Foxboro Companys income statement for Year 2 follows: |
Foxboro Company Income Statement | ||
Sales | $ | 704,000 |
Cost of goods sold | 68,000 | |
Gross margin | 636,000 | |
Selling and administrative expenses | 217,000 | |
Net operating income | 419,000 | |
Gain on sale of equipment | 7,000 | |
Income before taxes | 426,000 | |
Income taxes | 127,800 | |
Net income | $ | 298,200 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows: |
Foxboro Company Balance Sheet | ||||
Year 2 | Year 1 | |||
Assets | ||||
Cash | $ | 271,000 | $ | 28,000 |
Accounts receivable | 253,000 | 143,000 | ||
Inventory | 319,000 | 285,000 | ||
Prepaid expenses | 10,000 | 20,000 | ||
Total current assets | 853,000 | 476,000 | ||
Plant and equipment | 621,000 | 512,000 | ||
Accumulated depreciation | 165,500 | 130,900 | ||
Net plant and equipment | 455,500 | 381,100 | ||
Loan to Harker Company | 45,000 | 0 | ||
Total assets | $ | 1,353,500 | $ | 857,100 |
Liabilities and Stockholders' Equity | ||||
Accounts payable | $ | 311,000 | $ | 251,000 |
Accrued liabilities | 50,000 | 58,000 | ||
Income taxes payable | 85,700 | 81,100 | ||
Total current liabilities | 446,700 | 390,100 | ||
Bonds payable | 202,000 | 101,000 | ||
Total liabilities | 648,700 | 491,100 | ||
Common stock | 345,000 | 271,000 | ||
Retained earnings | 359,800 | 95,000 | ||
Total stockholders' equity | 704,800 | 366,000 | ||
Total liabilities and stockholders' equity | $ | 1,353,500 | $ | 857,100 |
Equipment that had cost $31,700 and on which there was accumulated depreciation of $11,100 was sold during Year 2 for $27,600. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock. |
Required: | |
1. | Using the indirect method, compute the net cash for operating activities for Year 2. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.) |
Net cash (Click to select)provided byused in operating activities | $ |
2. | Prepare a statement of cash flows for Year 2. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.) |
Foxboro Company Statement of Cash Flows | ||
Operating activities: | ||
(Click to select)Net lossNet income | $ | |
Adjustments to convert net income to cash basis: | ||
(Click to select)Decrease in accrued liabilitiesIncrease in accrued liabilitiesIncrease in prepaid expensesIncrease in accounts receivableIncrease in inventoryIncrease in income taxes payableDecrease in accounts payableIncrease in accounts payableGain on sale of equipmentDecrease in inventoryDepreciationDecrease in prepaid expensesDecrease in accounts receivableDecrease in income taxes payable | $ | |
(Click to select)Increase in accounts payableIncrease in accounts receivableDecrease in inventoryGain on sale of equipmentDecrease in accounts payableDecrease in accrued liabilitiesIncrease in accrued liabilitiesDecrease in income taxes payableIncrease in income taxes payableDecrease in accounts receivableDecrease in prepaid expensesIncrease in inventoryIncrease in prepaid expensesDepreciation | ||
(Click to select)Increase in accounts payableDecrease in accrued liabilitiesGain on sale of equipmentIncrease in inventoryDecrease in income taxes payableDecrease in accounts receivableIncrease in income taxes payableDecrease in inventoryIncrease in accounts receivableDepreciationIncrease in prepaid expensesIncrease in accrued liabilitiesDecrease in prepaid expensesDecrease in accounts payable | ||
(Click to select)Decrease in prepaid expensesIncrease in accounts payableDecrease in income taxes payableDecrease in accounts receivableIncrease in prepaid expensesGain on sale of equipmentIncrease in accrued liabilitiesIncrease in accounts receivableIncrease in inventoryDepreciationDecrease in accounts payableDecrease in accrued liabilitiesDecrease in inventoryIncrease in income taxes payable | ||
(Click to select)Decrease in accounts receivableDecrease in accrued liabilitiesIncrease in income taxes payableDecrease in accounts payableIncrease in accrued liabilitiesIncrease in prepaid expensesIncrease in accounts payableIncrease in inventoryDecrease in inventoryDecrease in income taxes payableIncrease in accounts receivableDecrease in prepaid expensesGain on sale of equipmentDepreciation | ||
(Click to select)Decrease in prepaid expensesIncrease in inventoryDepreciationIncrease in accrued liabilitiesGain on sale of equipmentIncrease in accounts receivableDecrease in accounts receivableIncrease in income taxes payableDecrease in accounts payableIncrease in accounts payableDecrease in income taxes payableDecrease in inventoryIncrease in prepaid expensesDecrease in accrued liabilities | ||
(Click to select)Decrease in prepaid expensesIncrease in accrued liabilitiesGain on sale of equipmentDecrease in accounts receivableDepreciationIncrease in inventoryDecrease in accounts payableIncrease in income taxes payableIncrease in accounts receivableDecrease in inventoryIncrease in prepaid expensesDecrease in accrued liabilitiesDecrease in income taxes payableIncrease in accounts payable | ||
(Click to select)Decrease in income taxes payableIncrease in income taxes payableGain on sale of equipmentIncrease in accounts receivableDecrease in accrued liabilitiesIncrease in prepaid expensesDepreciationIncrease in inventoryIncrease in accounts payableDecrease in accounts payableDecrease in accounts receivableIncrease in accrued liabilitiesDecrease in prepaid expensesDecrease in inventory | ||
Net cash (Click to select)provided byused in operating activities | ||
Investing activities: | ||
(Click to select)Decrease in prepaid expensesDecrease in inventoryProceeds from sale of equipmentIncrease in prepaid expensesDecrease in accounts receivableCash dividendsAdditions to plant and equipmentDepreciationIncrease in accounts payableDecrease in accounts payableIncrease in inventoryIncrease in accounts receivableLoan to Harker CompanyIssuance of bonds payable | ||
(Click to select)Decrease in accounts receivableIncrease in prepaid expensesDepreciationDecrease in accounts payableDecrease in prepaid expensesProceeds from sale of equipmentIncrease in accounts payableLoan to Harker CompanyIssuance of bonds payableIncrease in inventoryIncrease in accounts receivableDecrease in inventoryCash dividendsAdditions to plant and equipment | ||
(Click to select)Increase in prepaid expensesDecrease in accounts receivableDecrease in inventoryIncrease in accounts payableDepreciationAdditions to plant and equipmentDecrease in prepaid expensesIncrease in inventoryCash dividendsProceeds from sale of equipmentDecrease in accounts payableIncrease in accounts receivableIssuance of bonds payableLoan to Harker Company | ||
Net cash (Click to select)provided byused in investing activities | ||
Financing activities: | ||
(Click to select)Decrease in accounts receivableIncrease in prepaid expensesAdditions to plant and equipmentCash dividendsIssuance of common stockDecrease in accounts payableLoan to Harker CompanyIncrease in accounts payableIncrease in inventoryProceeds from sale of equipmentDecrease in inventoryDecrease in prepaid expensesIssuance of bonds payableIncrease in accounts receivable | ||
(Click to select)Increase in accounts payableDecrease in inventoryIssuance of common stockCash dividendsLoan to Harker CompanyDecrease in prepaid expensesAdditions to plant and equipmentProceeds from sale of equipmentDecrease in accounts payableIncrease in inventoryDecrease in accounts receivableIncrease in prepaid expensesIssuance of bonds payableIncrease in accounts receivable | ||
(Click to select)Increase in accounts payableCash dividendsIncrease in inventoryDecrease in prepaid expensesIssuance of bonds payableDecrease in inventoryAdditions to plant and equipmentIssuance of common stockDecrease in accounts payableDecrease in accounts receivableIncrease in accounts receivableLoan to Harker CompanyIncrease in prepaid expensesProceeds from sale of equipment | ||
Net cash (Click to select)used inprovided by financing activities | ||
(Click to select)Net increase in cashNet decrease in cash | ||
Cash balance, beginning of year | ||
Cash balance, end of year | $ | |
3. | Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.) |
Free cash flow | $ |
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