Using the informatin above answer and show your work for the following questions

Question

Using the informatin above answer and show your work for the following questions:

A. Use the indirect method and compute the net cash provided by operating activities for the year 2014.

B. Prepare a statement of cash flows for the year 2014.

C. compute the the free cash flow for the year 2014 and explain why cash declined so sharply during the year 2014.

El Toro Company Income Statement For the Period January 1, 2014 through December 31, 2014 Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses Net Operating Income Gain on Sale of Equipment Income Before Taxes Income Taxes Net Income 700,000 400,000 300,000 216,000 84,000 6,000 90,000 27,000 63,000 El Toro Company Comparative Balance Sheets December 31, 2014 December 31, 2013 Assets Cash Accounts Receivable Invento Prepaid Expenses Total Current Assets Plant and Equipment Accumulated Depreciation 11,000 250,000 318,000 7,000 586,000 620,000 165,000 19,000 180,000 270,000 16,000 485,000 500,000 130,000

Explanation / Answer

-164000

Cash flow indirect method Cash flow from operating activities Net income 63000 Adjustments to reconcile the net income Depreciation expense 45000 Gain on sale of equipment -6000 Changes in current asset and liabilities Increase in accounts receivable -70000 Increase in Inventory -48000 Decrease in prepaid expense 9000 Increase in accounts payable 50000 Decrease in Accrued liabilities -8000 Increase in income tax payable 4000 -24000 Cash flow from operating activities 39000 Cash flow from Investing activities Sales of equipment 26000 Purchase of equipment -150000 Loan to hoaker company -40000 Cash flow from Investing activities

-164000

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