Question

Here are comparative balance sheets for Harman Corporation. Prepare a 15 points statement of cash flows-indirect method and compute the free cash flow for 2017. * HARMAN CORPORATION Comparative Balance Sheets December 31 2017 Cash $ 27,200 Accounts receivable 24,200 Investments 20,000 Equipment 60,000 Accumulated depreciation (14,000) Total $117,400 2016 $ 17,700 22,300 16,000 70,000 (10,000) $116,000 Accounts payable Bonds payable Common stock Retained camings Total $ 19,600 10,000 55 000 32,800 $117,400 $11,100 30,000 45.000 29,900 $116,000 Additional information: 1. Net income was $34,300. Dividends declared and paid were $31,400. 2. Equipment which cost $10,000 and had accumulated depreciation of $1,200 was sold for $5,300. 3. All other changes in noncurrent account balances had a direct cllect on cash flows, except the change in accumulated depreciation.

Answer 1

HARMAN CORPORATION CASH FLOW STATEMENT Amount $34,300 Particulars Cash Flow From Operating Activities Net Income Adjustment to reconcile net income to net cash provided by operating activities - Depreciation ($4,000+ $1,200) - Loss on Sale of Equipment ($10,000 - $1,200 - $5,300)) - Increase in Accounts Receivable ($24,200 - $22,300) - Increase in Accounts Payable ($19,600 - $11,100) Net Cash Flow From Operating Activities (A) $5,200 $3,500 ($1,900) $8,500 $49,600 Cash Flow From Investing Activities Sale of Equipment Purchase of Investments Net Cash flow from Investing Activities (B) $5,300 ($4,000) $1,300 Cash Flow From Financing Activities Payment of Cash Dividend Issue of Common Stock Payment for Bonds Net Cash used in Financing Activities (C) ($31,400) $10,000 ($20,000) ($41,400) Net increase in cash (A+B+C) Add: Cash as on Jan 1 2017 Cash as on December 31, 2017 $9,500 $17,700 $27,200

Free Cash Flow = Net cash flow from operations - Capital expenditure

= $49,600 - $4,000

= $45,600