Question

Megan Corporation's net income last year was $106,000. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts Cash and cash equivalents $(9,400) (22,000) $ 7,000 Accounts receivable Inventory Prepaid expenses $(12,600) $ 88,000 Long-term investments Property, plant, and equipment Accumulated depreciation Liability and Equity Accounts $ 71,000 $ 74,000 Accounts payable 0 $ 19,120 $ (12,720) $ (42,000) Accrued liabilities Income taxes payable Bonds payable Common stock $28,000 Retained earnings $ 55,600

2.

Answer 1

1.

Cash flows from operating activities
Net Income		$   106,000
Adjustments to reconcile net income to ;
Depreciation expense	$    74,000
Decrease in accounts receivable	$    22,000
Increase in inventory	$    (7,000)
Decrease in prepaid expense	$    12,600
Increase in accrued liabilities	$    19,120
Decrease in income tax payable	$ (12,720)
		$   108,000
Net cash provided by operating activities		$   214,000

Net cash provided by operating activities	$   214,000
Less: Dividends paid	$   (50,400)
Less: Capital expenditure	$   (71,000)
Free cash flow	$     92,600

2.

Cash flows from operating activities
Net Income		$             41
Adjustments to reconcile net income to ;
Depreciation expense	$             13
Decrease in accounts receivable	$               5
Decrease in inventory	$               1
Increase in accounts payable	$             17
		$             36
Net cash provided by operating activities		$             77

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