Statement of Cash Flows: Indirect Method PAGE 20 The comparative balance sheets

Question

Statement of Cash Flows: Indirect Method PAGE 20 The comparative balance sheets for John Woods Mfg. Co., for December 31, 2016 and 2015 follow. Additional information about John Wood's operations during 2016 is as follows:(a) net loss $75,000-be careful here:(b) furniture & fixture depreciatior expense amounts $46,800 (c) furniture and fixtures that cost $35,600 with accumulated depreciation of $28,800 sold at a gain of $7,000; (d) F &F; purchases, $39,600; (e) patent amortization, $6,000; purchase of patent, $4,000; (D) funds borrowed by issuing converted bonds payable in the amount $100,000 into 4,000 shares of common stock (h) 1,500 shares of $20 par value common stock issued for a total of s50,000; and () paid notes payable, $40,000; notes payable repaid, $20,000; (2) cash dividend, $6,000 REQUIRED 1. Using the indirect method, prepare a statement of cash flows for John Woods Mfg. 2. Compute and assess cash flow yield and free cash flow for 2016. (Note: Round cash flow yield to one decimal place.)

Explanation / Answer

Cash flow from Operating Activities Net Income -75000 Adjustments: Depreciation expense 46800 Decrease in Account Receivable 34800 Decrease in Inventory 100000 Decrease in Prepaid Expenses 1000 Increase in Account Payable 3000 Gain on sale of F&F -7000 Amortization of Patents 6000 Decrease in Income taxes Payable -3000 181600 Net cash flow from Operating Activities Cash flow from Investing Activities Purchase of F&F -39600 Sale of F& F 13800 Purchase of Patents -60000 -85800 Cash flow from Financing Activities Issue of Notes payable 40000 Repaid notes payable -20000 Dividend paid -6000 Issue of stock 20000 34000 Net cash flow from financing activities Opening balance of cash 50000 Ending balance of cash 104800

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