Question

Megan Corporation's net income last year was $109,000. Changes in the company's balance sheet accounts for the year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents	$	(11,800	)
Accounts receivable	$	(25,000	)
Inventory	$	8,500
Prepaid expenses	$	(14,700	)
Long-term investments	$	91,000
Property, plant, and equipment	$	77,000
Accumulated depreciation	$	80,000
Liability and Equity Accounts:
Accounts payable	$	0
Accrued liabilities	$	20,380
Income taxes payable	$	(13,080	)
Bonds payable	$	(46,500	)
Common stock	$	31,000
Retained earnings	$	53,200

The company paid a cash dividend of $55,800 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.

The free cash flow for the year was:

Answer 1

Cash flows from operating activities
Net Income		$ 109,000
Adjustments to reconcile net income to ;
Depreciation expense	$   80,000
Changes in current operating assets and liabilities
Decrease in accounts receivable	$   25,000
Increase in inventories	$   (8,500)
Decrease in prepaid expenses	$   14,700
Increase in accrued liabilities	$   20,380
Decrease in income tax payable	$ (13,080)
		$ 118,500
Net cash provided by operating activities		$ 227,500

Net cash provided by operating activities	$ 227,500
Less: Capital expenditure	$ (77,000)
Less: Dividend	$ (55,800)
Free cash flow	$   94,700

You can reach me over comment box if you have any doubts. Please rate this answer