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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.
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:
- 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.).
- 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.
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Calculate the following cash measures:
- Operating cash flow ratio
- Capital expenditure ratio (Hint: Capital expenditures can be found in the investing activities section of the statement of cash flows prepared in part a.)
- Free cash flow
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