Question

Freeman, Inc., reported the following financial statements for the last two years.

FREEMAN, INC.
2017 Income Statement
Sales	$	565,320
Cost of goods sold		273,965
Selling & administrative		124,721
Depreciation		54,564
EBIT	$	112,070
Interest		19,308
EBT	$	92,762
Taxes		48,236
Net income	$	44,526
Dividends	$	10,800
Addition to retained earnings	$	33,726

FREEMAN, INC. Balance Sheet as of December 31, 2016
Cash	$	13,440		Accounts payable	$	23,988
Accounts receivable		18,982
Inventory		13,806
Current assets	$	46,228		Long-term debt		135,600
Net fixed assets		344,438		Owners' equity		231,078
Total assets	$	390,666		Total liabilities and owners' equity	$	390,666

FREEMAN, INC. Balance Sheet as of December 31, 2017
Cash	$	14,426		Accounts payable	$	27,002
Accounts receivable		21,087
Inventory		22,766
Current assets	$	58,279		Long-term debt		153,200
Net fixed assets		406,299		Owners' equity		284,376
Total assets	$	464,578		Total liabilities and owners' equity	$	464,578

Requirement 1:

Calculate the operating cash flow. (Do not round intermediate calculations.)

Operating cash flow              $

Requirement 2:

Calculate the change in net working capital. (Do not round intermediate calculations.)

Change in net working capital             $

Requirement 3:

Calculate the net capital spending. (Do not round intermediate calculations.)

Net capital spending             $

Requirement 4:

Calculate the cash flow from assets. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow from assets             $

Requirement 5:

Calculate the cash flow to creditors. (Do not round intermediate calculations.)

Cash flow to creditors             $

Requirement 6:

Calculate the cash flow to stockholders. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow to stockholders             $

Answer 1

Answer of Requirement 1:

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flows = $112,070 + $54,564 - $48,236
Operating Cash Flows = $118,398

Answer of Requirement 2:

Ending Working Capital = Current Assets – Current Liabilities
Ending Working Capital = $58,279 - $27,002
Ending Working Capital = $31,277

Beginning Working Capital = Current Assets – Current Liabilities
Beginning Working Capital = $46,228 - $23,988
Beginning Working Capital = $22,240

Change in Net Working Capital = Ending Working Capital – Beginning Working Capital
Change in Net Working Capital = $31,277 - $22,240
Change in Net Working Capital = $9,037

Answer of Requirement 3:

Net Capital Spending = Ending Net Fixed Assets – Beginning Net Fixed Assets + Depreciation
Net Capital Spending = $406,299 - $344,438 + $54,564
Net Capital Spending = $116,425

Answer of Requirement 4:

Cash Flow from Assets = Operating Cash Flow – Change in Net Working Capital – Net Capital Spending
Cash Flow from Assets = $118,398 - $9,037 - $116,425
Cash Flow from Assets = -$7,064

Answer of Requirement 5:

Cash Flow to Creditors = Interest Paid – (Ending Long term Debt – Beginning Long term Debt)
Cash Flow to Creditors = $19,308 – ($153,200 - $135,600)
Cash Flow to Creditors = $19,308 - $17,600
Cash Flow to Creditors = $1,708