Gutierrez Corporation's \(20 \times 2\) income statement and its comparative balance sheets as of June 30, LO 6 The Cash Flow Statement-

LO 7 Direct Method \(20 \times 2\) and \(20 \times 1\) appear on the next page.

Additional information about \(20 \times 2\) is as follows:

(a) Equipment that cost 48,000 with accumulated depreciation of 34,000 was sold at a loss of 8,000 ;

(b) land and building were purchased in the amount of 200,000 through an increase of 200,000 in the mortgage payable;

(c) a 40,000 payment was made on the mortgage;

(d) the notes were repaid, but the company borrowed an additional 60,000 through the issuance of new notes payable; and

(e) a 120,000 cash dividend was declared and paid.

REQUIRED 1. Prepare a cash flow statement using the direct method. Include a supporting schedule of noncash investing and financing transactions.

2. What are the primary reasons for Gutierrez Corporation's large increase in cash from \(20 \times 1\) to \(20 \times 2\) ?
3. Calculate and assess cash flow yield and free cash flow for \(20 \times 2\).
LO 6 The Cash Flow Statement-
LO 7 Indirect Method

Transcribed Image Text:

Gutierrez Corporation Income Statement For the Year Ended June 30, 20x2 Sales Cost of Goods Sold Gross Profit Operating Expenses (including Depreciation Expense of 120,000) Income from Operations Other Income (Expenses) Loss on Sale of Equipment Interest Expense Profit before Income Taxes Income Taxes Net Profit 2,081,800 1,312,600 769,200 378,400 390,800 (8,000) (75,200) (83,200) 307,600 68,400 239,200