Question

Comparative financial statement data for Carmono Company follow: This Year Last Year Assets Cash $ 17.00...

Comparative financial statement data for Carmono Company follow:

This Year Last Year
Assets
Cash $ 17.00 $ 33.00
Accounts receivable 88.00 81.00
Inventory 140.00 128.60
Total current assets 245.00 242.60
Property, plant, and equipment 288.00 232.00
Less accumulated depreciation 60.80 45.60
Net property, plant, and equipment 227.20 186.40
Total assets $ 472.20 $ 429.00
Liabilities and Stockholders’ Equity
Accounts payable $ 84.00 $ 65.00
Common stock 194.00 148.00
Retained earnings 194.20 216.00
Total liabilities and stockholders’ equity $ 472.20 $ 429.00

For this year, the company reported net income as follows:

Sales $ 1,800.00
Cost of goods sold 1,080.00
Gross margin 720.00
Selling and administrative expenses 700.00
Net income $ 20.00

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmono’s free cash flow for this year.

Homework Answers

Answer #1
Cash Flow Statement
Cash flows from Operating activities
Net Income for the year 20
Adjustment required
Depreciation expense 15.2
Increase in Accounts receivable -7
Increase in Inventory -11.4
Increase in Accounts payable 19
Net cash provided from Operating activities 35.8
Cash flows from Investing activities
Purchase of Equipment -56
Net cash used in investing activities -56
Cash flows from Financing activities:
Issuance of stock 46
Dividend paid -41.8
Net cash provided from Financing activities 4.2
Net Increase in cash -16
Beginning balance of cash 33
Ending balance of cash 17
Free cash Flows:
Net cashflows from Operatng activities 35.8
Less: Capital expenditures -56
Free cash Flows: -20.2
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