Question

1. Use the indirect method and compute the net cash provided by operating activities for the year 2014.

2. prepare a statement of cash flows for the year 2014.

3. compute the the free cash flow for the year 2014.

4. explain why cas declined so sharply during the year 2014.

Foxbore Company Income Statement For the Period January 1, 2014 through December 31, 2014 Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses Net Operating Income Gain on Sale of Equipment Income Before Taxes Income Taxes 700.000 400.000 300.000 216.000 84.000 6.000 90.000 27.000 63.000 Net Income Foxboro Company Comparative Balance Sheets December 31, 2014 December 31, 2013 Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment Accumulated Depreciation Net Plant and Equipment Loan to Harker Company Total Assets 11.000 250.000 318.000 7.000 586.000 620,000 165.000 455.000 40.000 1.08000 19.000 180.000 270,000 16,000 485.000 500.000 130.000 370.000 888 MMO 310.000 42.000 Liabilities and Stockholders' Equity Accounts Payable Accrued Liabilities Income Taxes Payable Total Current Liabilities Bonds Payable Total Liabilities Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 84.000 416.000 190.000 66000 335.000 120.000 455.000 1.081.000 260.000 50.000 80.000 390.000 100.000 490,000 275.000 90,000 365.000 855.000 ADDITIONAL INFORMATION Equipment that had cost $30,000 and on which there was accumulated depreciation of S10,000 was sold during 2014 for $26,000. The company declared and paid a cash dividend during 2014. It did not retire any bonds or repurchase any of its own stock

Answer 1

X fx 1 & 2 AB 1 & 2 Foxboro Company Statement of Cash Flows (indirect method) Year Ended December 31, 2014 cash flow from operating activities net income $ 63,000 adjustments to reconcile net income to net cash flow from operating activities: $ 45,000 $ 6,000 -$ 70,000 $ 9,000 -$ 48,000 $ 50,000 $ 8,000 $ 4,000 $ 39,000 depreciation expense gain on sale of equipment changes in current operating assets and liabilities: increase in accounts receivable decrease in prepaid expenses increase in inventory increase in accounts payable decrease in accrued liabilities increase in income tax payable net cash flow from operating activities cash flow from investing activities cash received from sale of equipment cash paid for purchase of equipment loan to Harker Company net cash flow from investing activities cash flow from financing activities issue of common stock issue of bonds payable dividend paid net cash flow from financing activities net cash flow from all activities (net increase in cash) cash balance at prior year end cash balance at current year end $ 26,000 $ 150,000 $ 40,000 $164,000 $ 60,000 $ 90,000 $ 33,000 $ 117,000 $ 8,000 $ 19,000 $ 11,000

| 3 net cash flow from operating activities cash received from sale of equipment cash paid for purchase of equipment loan to Harker Company free cash flow $ 39,000 $ 26,000 -$ 150,000 -$ 40,000 -$ 125,000

4 L cash declined so sharply during 2014 because of the following 2 main reasons - a The company purchased equipment worth $150,000 during 2014. | b The company gave loan worth $40,000 to Harker company.

for formulas and calculations, refer to the image below -

B2 X for 1&2 A B 1 & 2! Foxboro Company Statement of Cash Flows (indirect method) Year Ended December 31, 2014 cash flow from operating activities net income 63000 adjustments to reconcile net income to net cash flow from operating activities: =165000+10000-130000 -6000 =180000-250000 =16000-7000 =270000-318000 =310000-260000 -42000-50000 =84000-80000 =SUM(D6:016) depreciation expense gain on sale of equipment changes in current operating assets and liabilities: increase in accounts receivable decrease in prepaid expenses increase in inventory increase in accounts payable decrease in accrued liabilities increase in income tax payable net cash flow from operating activities cash flow from investing activities cash received from sale of equipment cash paid for purchase of equipment loan to Harker Company net cash flow from investing activities cash flow from financing activities issue of common stock issue of bonds payable dividend paid net cash flow from financing activities net cash flow from all activities (net increase in cash) cash balance at prior year end cash balance at current year end 26000 =-620000+30000-500000) =0-40000 =SUM(D19:021) =335000-275000 =190000-100000 --(90000+63000-120000) =SUM(D24:026) =D17+D22+D27 19000 =D28+D29