I am so confused as to how to even go about this problem. Could someone show ste

Question

I am so confused as to how to even go about this problem. Could someone show steps to get to answers.

Statement of Cash Flows (Indirect Method) The Rural Company's income statement and comparative balance sheets as of December 31 of 2016 and 2015 are shown below: RURAL COMPANY Income Statement For the Year Ended December 31, 2016 Sales Revenue Cost of Goods Sold $376,000 Wages Expense Depreciation Expense 22,000 Rent Expense Income Tax Expense 31,000 564,000 Net Income $645,000 107,000 28,000 $81,000

Explanation / Answer

a) Change in cash during 2016 = $41000 - $33000 = $8000 increase

b)

c)

Free Cash flow = Operating Cash flow - capital expenditures = $99000 - $120000 = ($21000)

d)

Operating cash flow to current liabilities ratio = $99000 / ($29000+$14000+$7000) = 1.98

e)

Operating cash flow to capital expenditure ratio = $99000 / $120000 = 0.825

Cash flow from operating activities net income $      81,000 Add (deduct) items to convert net income to cash basis depreciation $      22,000 Accounts Receivable $        8,000 Inventory $   (26,000) Prepaid Rent $      (4,000) Accounts Payable $      12,000 Wages payable $        7,000 Income Tax Payable $      (1,000) Cash flow provided by operating activites $      99,000 Cash flow from investing activites Purchase of plant assets (420000-300000) $ (120,000) Cash Flow from Financing Activities Issuance of common stock $   57,000 Payment of dividend $ (28,000) Cash provided by financing activites $      29,000 Net increase in cash during 2016 $        8,000 Cash at the beginning of the year $      33,000 Cash at the end of the year $      41,000

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