Ex. 181
Newman Corporation's comparative statement of financial position are presented below.
NEWMAN CORPORATION
Comparative Statement of Financial Position
December 31
2014 2013
Equipment$ 60,000$ 70,000
Accumulated depreciation (14,000) (10,000)
Investments25,00016,000
Accounts receivable 25,20022,300
Cash 12,200 17,700
Total$108,400$116,000
Share capital-ordinary$ 50,000$ 45,000
Retained earnings 33,800 29,900
Bonds payable 10,000 30,000
Accounts payable 14,600 11,100
Total $108,400$116,000
Additional information:
1.Net income was $19,300. Dividends declared and paid were $15,400.
2.Equipment which cost $10,000 and had accumulated depreciation of $2,200 was sold for $3,800.
3.All other changes in non-current account balances had a direct effect on cash flows, except the change in accumulated depreciation.
Instruction
(a)Prepare a statement of cash flows for 2014 using the indirect method.
(b)Compute free cash flow.
Purchase of investments................................. (9,000)
Net cash used by investing activities........................ (5,200)
Cash flows from financing activities
Issuance of ordinary shares............................... 5,000
Retirement of bonds.................................... (20,000)
Payment of dividends................................... (15,400)
Net cash used by financing activities........................(30,400)
Net decrease in cash.................................... (5,500)
Cash at beginning of period............................... 17,700
Cash at end of period...................................$ 12,200
*[$14,000 – ($10,000 – $2,200)]**[3,800 – ($10,000 – $2,200)]
(b)$30,100 – $0 – $15,400 = $14,700