Barton and Williams Company reported the following items in 2015: Net income $50
ID: 2478658 • Letter: B
Question
Barton and Williams Company reported the following items in 2015:
Net income
$50,000
Dividends paid
5,000
Decrease in accounts receivable
12,000
Decrease in accounts payable
8,000
Purchase of equipment (capital expenditure)
9,000
Depreciation expense
3,500
Issue of notes payable
15,000
Required: Show all your calculations to derive the following answers. (You don't need to show in report format.)
1. net cash provided by operating activities
2. the net change in cash during 2015
3. free cash flow
Net income
$50,000
Dividends paid
5,000
Decrease in accounts receivable
12,000
Decrease in accounts payable
8,000
Purchase of equipment (capital expenditure)
9,000
Depreciation expense
3,500
Issue of notes payable
15,000
Explanation / Answer
1) Net cash provided by operating activities Net Income 50000 Add: Depriciation 3500 Decrease in accounts receivable 12000 15500 Less Decrease in accounts payable 8000 8000 Net cash flow from operating activities 57500 2) Net cash flow from operating activities 57500 Net cash provided by investing activity Issue of notes payable 15000 Less : Purchase of equipment 9000 Net cash flow from investing activities 6000 Net cash provided by financing activity Dividends paid -5000 Net cash flow from financing activities -5000 Net change in cash in 2015 58500 3) Free Cash Flow Net cash flow from operating activities 57500 Less : Purchase of equipment 9000 Free Cash Flow 48500
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