Question

P3.22Statement of Cash Flow. Presented below are the financial statements for the Amphlett Corporation, as of year-end 2016 and 2015 AMPHLETT CORPORATION Consolldated Balance Sheets As of Year-End (S thousands) 2016 2015 Assets Current 200,000 440,000 615,000 Inventory 600,000 Noncurrent Long-term i 310,000 390,000 (500,000) (500,000 600,000 105,000 95,000 Llablltles & Shareholders' Equity 190,000 1.090.000 850,000

Answer 1

Answer:

(all amounts are in thousand $)

Accumulated depreciation of property and equipment sold = Gross value of property and equipment sold - Book value

= $450,000 - $200,000 = 250,000

Depreciation for 2016 = Accumulated depreciation 2016 - (Accumulated depreciation 2016 - Accumulated depreciation of Property and equipment sold)

= 500000 - (500000 - 250,000)

=$250,000

Amortization for 2016 = Intangibles net in 2015 - Intangibles net in 2016 = 105000 - 95000 = 10000

Hence depreciation and amortization for 2016 = 250000 + 10000 = $265,000

Purchase of property and equipment in 2016 =

Gross property and equipment in 2016 - (Gross property and equipment in 2015 - Gross value of property and equipment sold in 2016)

= 1,800,000 - (1,100,000 - 450,000)

=1,150,000

Proceeds from issue of new common stock = Common stock in 2016 + Additional paid-in capital in 2016 - (Common stock in 2015 + Additional paid-in capital in 2015)

= 775,000 + 380,000 - (675,000 + 300,000) = 180,000

Dividend paid in 2016 = Retained earnings in 2015 + Net income in 2016 - Retained earnings in 2016

= 415000 +800000 - 865000

= $350,000

Comments on cash flow:

1. Although company has positive cash flow operations but the same is used in purchase of property and equipment. As sales are growing, purchase of property may be to support operations

2. The net cash flow in 2016 is negative.

3. The company has taken short term bank loan and purchased marketable securities.

4. There is increase in account receivables which is higher than proportionate increase in revenue.