Question

Marigold Co. reported the following items in the most recent year: Net income $49,000 Dividends paid 5,500 Increase in accounts receivable 13,000 Increase in accounts payable 7,700 Purchase of equipment 8,100 Depreciation expense 4,200 Issue of notes payable for cash 30,000 Calculate net cash provided (used) by operating activities, the net change in cash during the year, and free cash flow. Dividends paid are treated as financing activities. Marigold uses the indirect method for its Statement of Cash Flows. Net cash provided by operating activities? Net change in cash during the year? Free cash flow?

Answer 1

Answer

• Requirement asked

Cash flows from operating activities
Net Income	$49,000
Increase in accounts receivables	($13,000)
Increase in accounts payable	$7,700
Depreciation expense	$4,200
Net Cash provided by Operating activities		$47,900	[Answer]
Cash flows from Investing activities
Purchase of equipment		($8,100)
Cash flows from financing activities
Dividends paid	($5,500)
Issue of notes payable	$30,000
Net Cash provided by financing activities		$24,500
Net Change in Cash during the year		$64,300	[Answer]
Free Cash flow	[$ 47900 - 8100]	$39,800	[Answer]

No.	Conceptual Notes
1	Cash Flow Statement reflects the Cash Inflows and Outflows during a period of time.
2	Effects of Non - Cash Transaction are adjusted from Net Income.
3	Depreciation Expense, Amortisation expenses are Added back to Net Income in Cash Flow Statement.
4	Decrease in Current Assets OR Increase in Current Liabilities are ADDED to Net Income
5	Increase in Current Assets OR Decrease in Current Liabilities are DEDUCTED from Net Income