QUESTION 10: For the year just completed, Hanna Company had net income of $63,000. Balances in the companys current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Year Beginning of Year Current assets: Cash and cash equivalents $ 56,000 $ 78,000 Accounts receivable $ 158,000 $ 192,000 Inventory $ 439,000 $ 343,000 Prepaid expenses $ 12,000 $ 13,000 Current liabilities: Accounts payable $ 358,000 $ 382,000 Accrued liabilities $ 8,000 $ 11,500 Income taxes payable $ 36,000 $ 29,000 The Accumulated Depreciation account had total credits of $54,000 during the year. Hanna Company did not record any gains or losses during the year. Required: Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash outflows as negative amounts.)

QUESTION 11

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		$ 40,500
Adjustments to convert net income to cash basis:
Depreciation	$ 21,400
Increase in accounts receivable	(60,500)
Increase in inventory	(26,300)
Decrease in prepaid expenses	9,900
Increase in accounts payable	53,200
Decrease in accrued liabilities	(10,000)
Increase in income taxes payable	3,300	(9,000)
Net cash provided by (used in) operating activities		31,500
Investing activities:
Proceeds from the sale of equipment	14,600
Loan to Thomas Company	(41,400)
Additions to plant and equipment	(121,100)
Net cash provided by (used in) investing activities		(147,900)
Financing activities:
Increase in bonds payable	88,200
Increase in common stock	38,200
Cash dividends	(28,800)
Net cash provided by (used in) financing activities		97,600
Net decrease in cash and cash equivalents		(18,800)
Beginning cash and cash equivalents		28,400
Ending cash and cash equivalents		$ 9,600

Required:

Compute Apex Companys free cash flow for the current year. (Negative amount should be indicated by a minus sign.)

QUESTION 12

The following changes took place last year in Pavolik Companys balance sheet accounts:

Asset and Contra-Asset Accounts			Liabilities and Stockholders' Equity Accounts
Cash	$ 16	D	Accounts payable	$ 50	I
Accounts receivable	$ 20	I	Accrued liabilities	$ 20	D
Inventory	$ 50	D	Income taxes payable	$ 25	I
Prepaid expenses	$ 15	I	Bonds payable	$ 172	I
Long-term investments	$ 17	D	Common stock	$ 80	D
Property, plant, and equipment	$ 335	I	Retained earnings	$ 70	I
Accumulated depreciation	$ 70	I

D = Decrease; I = Increase.

Long-term investments that cost the company $17 were sold during the year for $38 and land that cost $37 was sold for $20. In addition, the company declared and paid $14 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock.

The companys income statement for the year follows:

Sales		$ 900
Cost of goods sold		390
Gross margin		510
Selling and administrative expenses		380
Net operating income		130
Nonoperating items:
Loss on sale of land	$ (17)
Gain on sale of investments	21	4
Income before taxes		134
Income taxes		50
Net income		$ 84

The companys beginning cash balance was $120 and its ending balance was $104.

Required:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

2. Prepare a statement of cash flows for the year.

Hanna Company