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Selected financial information for Frank Corporation is presented below. Selected transactions for the current year are as follows: a. Purchased investment securities for $5,000 cash.
Selected financial information for Frank Corporation is presented below. Selected transactions for the current year are as follows: a. Purchased investment securities for $5,000 cash. b. Borrowed $15,000 on a two-year, 8 percent interest-bearing note. c. During the year, sold machinery for its carrying amount; received $11,000 in cash. d. Purchased machinery for $50,000; paid $9,000 in cash and signed a four-year note payable to the dealer for $41,000. e. Declared and paid a cash dividend of $10,000 on December 31 of the current year. Selected account balances at December 31 of the current and prior years are as follows: One-fourth of the sales and one-third of the purchases were made on credit. Required: 1. Prepare a statement of cash flows for the year ended December 31 of the current year. Use the indirect method to compute the cash flows from operating activities. Include any additional required note disclosures. 2. Based on the statement of cash flows, write a short paragraph explaining the major sources and uses of cash by Frank Corporation during the current year. 3. Compute and explain the quality of earnings ratio and the capital expenditures ratio
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