Question

Managerial Accounting. Please complete the Statement of Cash Flows

The following information was collected from Sierra Manufacturing's Income Statement and comparative Balance Sheet: Increase in cash $28,000 Decrease in accounts payable $25,000 Increase in account receivable $ 8,000 Increase in salaries payable $ 2,000 Decrease in inventory $16,000 Decrease in deferred income tax $ 4,000 Decrease in prepaid rent $ 3,000 Increase in notes payable $12,000 Increase in equipment $60,000 Decrease in common stock $25,000 Increase in accumulated depreciation $18,000 Sierra's net income for the year was $129,000. No direct exchange transactions occurred at Sierra during the year. A piece of equipment that had been purchased for $40,000 and had accumulated depreciation of $24,000 was sold for $20,000. Cash dividends of $30.000 were declared and paid during the year. Beginning cash was $30,000. Sierra uses the indirect method to prepare its statement of cash flows. Prepare Sierra's statement of cash flow and determine the free cash flow 15. What is the cash flow from operating activities? 16. What is the cash flow from investing activities? 17. What is the cash flow from financing activities? 18. What is the amount of free cash flow?

Answer 1

15. The cash flow from operating activities $151,000 16. The cash flow from investing activities -$80,000 17. The cash flow from financing activities -$43,000 18. The amount of free cash flow $21,000 [Net cash provided by operating activities - Capital Expenditure - Dividends] [S151,000 - $100,000 - $30,000] $129,000 Workings: Sierra manufacturing's Statement of Cash Flows For year ended Cash flows from operating activities Net Income Adjust to reconcile net income to Net cash provided by operating activities & change in working capital Depreciation Expenses Gain on sale of equipment Increase in Accounts receivable Decrease in Inventory Decrease in Prepaid rent Decrease in Accounts payable Increase in Salaries payable Decrease in Deferred income tax $42.000 -$4.000 -$8.000 $16,000 $3,000 -$25.000 $2.000 -$4.000 $22.000 $151,000 Net cash Provided by operating activities Cash flows from investing activities Sale of Equipment Purchase of Equipment Net cash used by investing activities $20.000 -$100.000 -$80,000 Cash flows from financing activities Decrease of common stock Increase in notes payable Payment of Cash dividends Net cash used by financing activities -$25,000 $12.000 -$30,000 -S43.000 Net cash procced Add: beginning cash and cash equivalent Ending cash and cash equivalent $28.000 $30,000 $58,000