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P12-8A Prepare a statement of cash ions-direct method. and compute cash based ratios Presented below are the financial statements of Warner Company. WARNER COMPANY Comparative
P12-8A Prepare a statement of cash ions-direct method. and compute cash based ratios Presented below are the financial statements of Warner Company. WARNER COMPANY Comparative Balance Sheet December 31 2017 2016 ssets $35,000 S20,000 as 14,000 Accounts receivable 20,000 28,000 60,000 Inventory Property, plant, and equipment Accumulated depreciaion Total 20,000 78,000 )124.000) 111,000 Liabilities and Stockholders' Equit Accounts payable Income taxes payable Bonds payable $19,000 $15,000 8,000 33,000 14,000 7.000 17,000 Common stock 18,000 50,000 111,000D10 Retained eamings Total 38,000 100$108.000 WARNER COMPANY Income Statement For the Year Ended December 31, 2017 Sales Revenue $242,000 Cost of goods sold 175,000 67,000 Gross profit Selling expenses $18,000 6,000 Administratve expenses 24,000 Income from operaions 43,000 Interest expense 3,000 Income before income taxes 40,000 Income tax expense 8,000 S32,000 Net income Additional data Depreciation expense was $17,500 2. Dividends declared and paid were S20.000 During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had accumulated depreciation of $9.500 at the time of sale Further analysis reveals the following Accounts payable pertains to merchandise suppliers All operating expenses except for depreciation were paid in cash. All depreciation expense is in the selling expense category 3. All sales and purchases are on account. nstructions (a) Prepare a statement of cash fows for Warner Company using the direct method (b)Compute free cash flow WARNER COMPANY Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities Cash receipts from customers Less cash payments To suppliers For operating expenses For interest For income taxes 4 Net cash provided by operating activities Cash flows from investing activities Sale of equipment Cash flows from financing activities Issuance of common stock Redemption of bonds Payment of dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period Computations: (1)Cash receipts from customers Sales Deduct: Increase in accounts receivable Cash receipts from customers ash payments t ie LI Cost of goods sold Add: Increase in inventory Cost of purchases Deduct Increase in accounts payable Cash payments to suppliers 4.000 Cash payments for operating expenses Operating expenses Deduct: Depreciation Cash payments for operating expenses (4) Cash payments for income taxes Income tax expense Add: Decrease in income taxes payable Cash payments for income taxes (b)Free cash flow Net cash proided by operating activities Less: Capital expenditures Cash dividends Free cash flows
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