Question

Sage Hill Inc had the following balance sheet at December 31, 2016. SAGE HILL INC. BALANCE SHEET DECEMBER 31, 2016 Cash $9.300 Accounts payable Accounts receivable 12.300 Bonds payable Investments 13,500 Common stock Plant assets (net) 36,900 Retained earnings Land 16,500 $88,500 $15,200 9,500 36,300 27.500 $88.500 During 2017, the following occurred. 1. Net income was $26,600. 2. Depreciation expense was $8,400. 3. Sage Hill liquidated its investment portfolio (comprised of available-for-sale investments), realizing a $4,200 loss. 4. Sage Hill issued $20.500 of common stock at par. 5. Dividends of $7,300 were declared and paid to stockholders. 6. Accounts receivable and accounts payable at December 31, 2017 were $15,500 and $14,000, respectively. 7. Sage Hill obtained $9,500in plant assets in exchange for issuing bonds. 8. Sage Hill purchased additional plant assets for $17,000. 9. Sage Hill purchased land for $20,100. 10. Cash at December 31, 2017 was $29,500. Prepare a statement of cash flows for the year 2017 for Sage Hill. (Show amounts that decrease cash flow with either a-sign e.g.-15,000 or in parenthesis eg. (15,000).)

Answer 1

Sage Hill Inc.
Statement of cash flows
For the year ended Dec. 31, 2017 (amounts in $)
cash flows from operating activities
net income		26600
adjustments to reconcile net income to
cash provided by operating activities:
add: depreciation	8400
add: loss on sale of investment	4200
less: increase in accounts receivable	-3200
less: decrease in accounts payable	-1200	8200
net cash provided by operating activities		34800
cash flows from investing activities:
sale of investment	9300
purchase of plant	-17000
purchase of land	-20100
net cash used by investing activities		-27800
cash flows from financing activities:
issuance of common stock	20500
payment of cash dividends	-7300
net cash provided by financing activities		13200
net increase in cash		20200
cash at beginning of the year		9300
cash at ending of the year		29500
plant assets purchased throguh issuance of $9500 bonds
Sage Hill Inc
Balance Sheet
As of Dec. 31, 2017 (amounts in $)
Assets
Cash	29500
Accounts receivable	15500
Plant assets	45500
Land	36600
Total assets		127100
Liabilities and stockholders equity
Accounts payable	14000
Bonds payable	9500
Total liabilities		23500
Stockholders equity
Common stock	36300
additional common stock	20500
ending common stock		56800
Beginning retained earnings	27500
add:net income	26600
less: dividend	-7300
ending retained earnings		46800
Total liabilities and stockholders equity		127100

free cash flow
cash from operations		34800
less: capital expenditure
purchase of plant	17000
purchase of land	20100
total capital expenditure		37100
free cash flow		-2300
current cash debt coverage	net cash provided by operating activities / average current liabilities
net cash provided by operating activity	34800
opening current liabilities only accounts payable	15200
closing current liabilities only accounts payable	14000
average current liabilities	14600
current cash debt coverage	2.38