Computing Cash Flows from Operating Activities: Indirect Method
During 2014, Cupello Corporation has a net income of $144,000. Included on its income statement were depreciation expense of $16,000 and amortization expense of $1,800. During the year, Accounts Receivable decreased by $8,200, Inventories increased by $5,400, Prepaid Expenses decreased by $1,000, Accounts Payable decreased by $14,000 and Accrued Liabilities decreased by $1,700. Use the indirect method to determine net cash flows from operating activities.
Cash Flows from investing activities and noncash transaction
During 2014, Fargo Company purchased land for $375,000. It paid $125,000 in cash and signed a $250,000 mortgage for the rest. The company also sold for $95,000 cash a building that originally cost $90,000 on which it had $70,000 of accumulated depreciation, making a gain of $75,000. Prepare the cash flows investing activities section and the schedule of noncash investing and financing transactions of the statement of cash flows.
During 2014, North Dakota Company issued $1,000,000 in long term bonds at 96, repaid $150,000 of bonds at face value, paid interest of $80,000, and paid dividends of $50,000. Prepare the cash flows from the financing activities section of the statement of cash flows.
Cash Generating Efficiency Ratios and Free Cash Flow
In 2014, Melvin Corporation had year-end assets of $1,100,000 sales of $1,580,000, net income of $180,000 net cash flows from operating activities of $360,000, purchases of plant assets of $240,000 and sales of plant assets of $40,000, and it paid dividends of $80,000. In 2014, year-end assets were $1,000,000. Calculate the cash-generating efficiency ratios of cash flow yield, cash flows to sales, and cash flows to assets. Also calculate free cash flow.
Vision, Inc.’s comparative income statements follow. Compute the amount and percentage changes for the income for the income statements, and comment on the changes from 2013 to 2014
Net Sales 2014 $360,000 2013 $290,000
Cost of goods sold 224,000 176,000
Gross margin $136,000 $114,000
Operating expenses 80,000 60,000
Operating income $56,000 $54,000
Interest expense 14,000 16,000
Income before income taxes $42,000 $44,000
Income taxes expense 14,000 16,000
Net income $28,000 $28,000
Earnings per share $2.80 $2.80
Vision Inc. comparative balance sheets follow Prepare common size statements and comment on the changes from 2013 to 2014
Current assets Assets 2014 $48,000 2013 $40,000
Property, plant, and equipment (net) 260,000 200,000
Total assets $308,000 $240,000
Current liabilities 2014 $36,000 2013 $44,000
Long term liabilities 180,000 120,000
Stockholder’s equity 92,000 76,000
Total liabilities and stockholder’s equity $308,000 $240,000
Using the informative for Vision Inc in the SE4 and SE5, compute the current ratio, receivables turnover, days’ sales uncollected, inventory turnover days inventory on hand, payables turnover days payable, and financing period for 2013 and 2014. Inventories were $8,000 in 2012, $10,000 in 2013 and $14,000 in 2014. Accounts receivable were $12,000 in 2012, $16,000 in 2013, and $20,000 in 2014. Accounts payable were $18,000 in 2012, $20,000 in 2013 and $24,000 in 2014. The company has no marketable securities or prepaid assets. Comment on the results.