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Aero Inc. had the following balance sheet at the end of operations for 2009. Cas

ID: 2434860 • Letter: A

Question

Aero Inc. had the following balance sheet at the end of operations for 2009.
Cash $20,000 Accounts Payable $30,000
Accounts Receivable $ 21,200 Bonds Payable $41,000
Trading Securities $32,000 Capital Stock $100,000
Plant Assets (Net) $81,000 Retained Earnings $23,200
$194,200 $194,200
During 2010 the following occured.

1.AERO liquidated its investment portfolio at a loss of $5,000.
2.A tract of land was purchased for $38,000.
3.An additional $30,000 in common stock was issued at par.
4.Dividends totaling $10,000 were declared and paid to stockholders'.
5.Net income for 2010 was $35,000, including $12,000 in depreciation expense.
6.Land was purchased through the issuance of $30,000 in addtional bonds.
7.At December 31, 2010, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000.

Prepare a statement of cash flows for the year of 2010 for Aero.
Complete the balance sheet as it would appear at December 31, 2010.
Compute Aero's free cash flow for 2010.

Explanation / Answer

free cash flow for 2010. Balance sheet Cash 20,000 Accounts payable $30,000 Accounts receivable 21,200 Bonds Payable $41,000 Trading securities 32,000 Capital stock $100,000 Plant Assets 81,000 Retained earnings 23,200 Other assets 40,000 -------- ---------- 194,200 194,200 ====== ====== Note: There is a missing figure / typing error in Assets. Total assets is short of $40,000. Statement of Cash Flow Net Income $35,000 Add: Depreciation $12,000 Income from operating activities $47,000 Cash inflow from investing activities Sale of trading securities $27,000 Purchase of land ($38,000) ($11,000) $36,000 Cash inflow from financing activities Issue of common stock $30,000 Payment of cash dividends ($10,000) $20,000 Net increase in cash $56,000 Cash In the beginning $ 20,000 Cash at the end $76,000 ====== Note: There is some mistake in transactions given – closing cash balance as per above statement is $76,000. However, as per question it is $70,200. The question needs to be carefully examined, again.

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