Sharon Feldman, president of Allied Company, considers $21,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $16,000 in cash was available at the end of 2011. Because the company reported a large net income for the year, and also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to Ms. Feldman.

Allied Company Comparative Balance Sheet December 31, 2011, and 2010
	2011		2010
Assets
Current assets:
Cash	$	16,000	$	34,200
Accounts Receivable		201,200		211,300
Inventory		250,900		196,600
Prepaid expenses		7,700		16,200
Total current assets		475,800		458,300
Long-term investments		93,000		125,000
Plant and equipment		862,000		751,000
Less accumulated depreciation		210,500		190,300
Net plant and equipment		651,500		560,700
Total assets	$	1,220,300	$	1,144,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	175,900	$	231,100
Accrued liabilities		8,100		15,200
Income taxes payable		42,800		39,500
Total current liabilities		226,800		285,800
Bonds Payable		203,000		102,000
Total liabilities		429,800		387,800
Stockholders equity:
Common stock		597,500		605,000
Retained earnings		193,000		151,200
Total stockholders' equity		790,500		756,200
Total liabilities and stockholders' equity	$	1,220,300	$	1,144,000

Allied Company Income Statement For the Year Ended December 31, 2011
Sales		$	820,000
Cost of goods sold			512,500
Gross margin			307,500
Selling and administrative expenses			219,350
Net operating income			88,150
Nonoperating items:
Gain on sale of investments	$20,500
Loss on sale of equipment	(6,200)		14,300
Income before taxes			102,450
Income taxes			30,730
Net income		$	71,720

The following additional information is available for the year 2011:

a.	The company sold long-term investments with an original cost of $32,000 for $52,500 during the year.
b.	Equipment that had cost $92,000 and on which there was $41,000 in accumulated depreciation was sold during the year for $44,800.
c.	The company declared and paid a cash dividend during the year.
d.	The stock of a dissident stockholder was repurchased for cash and retired during the year. No issues of stock were made.
e.	The company did not retire any bonds during the year.

Required:
1.	Using the indirect method, compute the net cash for operating activities for 2011. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Net cash (Click to select)provided byused in operating activities

$

2.	Prepare a statement of cash flows for 2011. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Allied Company Statement of Cash Flows For the Year Ended December 31, 2011
Operating activities:
(Click to select)Net lossNet income		$
Adjustments to convert net income to cash basis:
(Click to select)Gain on sale of investmentsDecrease in accounts receivableIncrease in income taxes payableIncrease in accounts payableIncrease in inventoryLoss on sale of equipmentDecrease in accrued liabilitiesIncrease in prepaid expensesDecrease in inventoryDecrease in accounts payableDecrease in prepaid expensesDepreciation	$
(Click to select)Decrease in accounts receivableIncrease in income taxes payableIncrease in inventoryDecrease in prepaid expensesGain on sale of investmentsDecrease in accounts payableDecrease in accrued liabilitiesDecrease in inventoryIncrease in accounts payableLoss on sale of equipmentDepreciationIncrease in prepaid expenses
(Click to select)Gain on sale of investmentsLoss on sale of equipmentIncrease in prepaid expensesDecrease in accrued liabilitiesDecrease in accounts payableDecrease in inventoryIncrease in inventoryDepreciationDecrease in accounts receivableIncrease in income taxes payableDecrease in prepaid expensesIncrease in accounts payable
(Click to select)Decrease in accounts receivableDecrease in accounts payableIncrease in prepaid expensesIncrease in inventoryIncrease in income taxes payableGain on sale of investmentsDecrease in prepaid expensesLoss on sale of equipmentDecrease in accrued liabilitiesDecrease in inventoryDepreciationIncrease in accounts payable
(Click to select)Increase in accounts payableDecrease in accounts receivableLoss on sale of equipmentDepreciationIncrease in inventoryDecrease in inventoryDecrease in accrued liabilitiesDecrease in accounts payableDecrease in prepaid expensesGain on sale of investmentsIncrease in prepaid expensesIncrease in income taxes payable
(Click to select)Loss on sale of equipmentDecrease in accrued liabilitiesDecrease in inventoryDecrease in accounts payableIncrease in inventoryDecrease in prepaid expensesIncrease in accounts payableGain on sale of investmentsDecrease in accounts receivableIncrease in prepaid expensesIncrease in income taxes payableDepreciation
(Click to select)Increase in prepaid expensesIncrease in inventoryGain on sale of investmentsDecrease in accounts receivableLoss on sale of equipmentIncrease in accounts payableDecrease in prepaid expensesDecrease in inventoryDecrease in accrued liabilitiesDecrease in accounts payableIncrease in income taxes payableDepreciation
(Click to select)Decrease in prepaid expensesDecrease in inventoryIncrease in accounts payableDecrease in accrued liabilitiesGain on sale of investmentsDepreciationDecrease in accounts receivableIncrease in income taxes payableDecrease in accounts payableIncrease in inventoryIncrease in prepaid expensesLoss on sale of equipment
(Click to select)DepreciationIncrease in prepaid expensesDecrease in accounts receivableDecrease in accounts payableDecrease in accrued liabilitiesDecrease in prepaid expensesDecrease in inventoryIncrease in income taxes payableIncrease in accounts payableIncrease in inventoryGain on sale of investmentsLoss on sale of equipment
Net cash (Click to select)used inprovided by operating activities
Investing activities:
(Click to select)Additions to plant and equipmentDecrease in accounts receivableDecrease in accrued liabilitiesDecrease in prepaid expensesDecrease in accounts payableIncrease in accounts payableIncrease in prepaid expensesIncrease in accrued liabilitiesIncrease in accounts receivableProceeds from sale of equipmentIncrease in inventoryProceeds from sale of long-term investments
(Click to select)Decrease in accounts receivableIncrease in accounts receivableAdditions to plant and equipmentIncrease in inventoryIncrease in accrued liabilitiesProceeds from sale of long-term investmentsIncrease in prepaid expensesDecrease in accounts payableProceeds from sale of equipmentDecrease in prepaid expensesIncrease in accounts payableDecrease in accrued liabilities
(Click to select)Increase in prepaid expensesProceeds from sale of long-term investmentsAdditions to plant and equipmentDecrease in accounts payableProceeds from sale of equipmentIncrease in accrued liabilitiesDecrease in prepaid expensesIncrease in accounts receivableDecrease in accrued liabilitiesDecrease in accounts receivableIncrease in inventoryIncrease in accounts payable
Net cash (Click to select)used inprovided by investing activities
Financing activities:
(Click to select)Increase in inventoryIncrease in accounts payableIncrease in accounts receivableAdditions to plant and equipmentDecrease in accounts payableDecrease in common stockCash dividendsIssuance of bonds payableDecrease in prepaid expensesProceeds from sale of equipmentDecrease in inventoryDecrease in accounts receivable
(Click to select)Additions to plant and equipmentIncrease in inventoryIssuance of bonds payableDecrease in prepaid expensesDecrease in accounts payableIncrease in accounts receivableDecrease in accounts receivableIncrease in accounts payableProceeds from sale of equipmentCash dividendsDecrease in common stockDecrease in inventory
(Click to select)Cash dividendsIncrease in accounts receivableDecrease in common stockIncrease in accounts payableIncrease in inventoryDecrease in accounts payableDecrease in prepaid expensesDecrease in inventoryDecrease in accounts receivableAdditions to plant and equipmentIssuance of bonds payableProceeds from sale of equipment
Net cash (Click to select)used inprovided by financing activities
(Click to select)Net increase in cashNet decrease in cash
Cash balance, beginning of year
Cash balance, end of year		$

3.	Compute the free cash flow for 2011. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Free cash flow

$

References

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