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Prepare a Statement of Cash Flows, Indirect Method; Analyze Using Cash Ratios. Nolan Companys most recent balance sheet, income statement, and other important information for

Prepare a Statement of Cash Flows, Indirect Method; Analyze Using Cash Ratios. Nolan Companys most recent balance sheet, income statement, and other important information for 2012 are presented as follows.

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Additional data for 2020 are as follows:

  • Sold equipment with a book value of $13,000 (= $27,000 cost $14,000 accumulated depreciation) for $21,000 cash
  • Purchased equipment for $10,000 cash
  • Sold long-term investments for $6,000 cash and these investments had an original cost of $8,000
  • Received $19,000 cash related to notes payable
  • Issued common stock for $35,000 cash
  • Declared and paid $4,000 in cash dividends

Required:

  1. Use the four steps described in the chapter to prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method. Refer to the format presented in Figure 6.7 Statement of Cash Flows (Home Store, Inc.).
  2. The owner of Nolan Company wants to know how cash more than doubled, from $82,000 to $165,000, given the companys modest net income of $9,000. Use the information in the statement of cash flows to briefly explain why cash more than doubled.
  3. Calculate the following cash measures:

    1. Operating cash flow ratio
    2. Capital expenditure ratio (Hint: Capital expenditures can be found in the investing activities section of the statement of cash flows prepared in part a.)
    3. Free cash flow
Nolan Company Income Statement for the Year Ended December 31, 2020

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