Question

Problem 12-07A Presented below are the financial statements of Novak Company Novak Company Comparative Balance Sheets December 31 Assets 2022 Cash $ 112,000 Accounts receivable 64,000 Inventory 89,600 Property, plant, and equipment 192,000 Accumulated depreciation (102,400) Total $355,200 2021 $ 64,000 44,800 64,000 249,600 (76,800 ) $345,600 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total $ 60,800 22,400 54,400 57,600 160,000 $355,200 $ 48,000 25,600 105,600 44,800 121,600 $345,600 $774,400 560,000 214,400 Novak Company Income Statement For the Year Ended December 31, 2022 Sales revenue Cost of goods sold Gross profit Selling expenses $57,600 19.200 Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense 76,800 137,600 9,600 128,000 25,600 $ 102,400 Net income Additional data: 1. Depreciation expense was $56,000. 2. Dividends declared and paid were $64,000. 3. During the year equipment was sold for $27,200 cash. This equipment cost $57,600 originally and had accumulated depreciation of $30,400 at the time of sale.

Answer 1

FCF = OCF-Capital expenditure-Change in NWC
OCF = EBIT+Depreciation-Taxes = 137600+56000-25600 =	$      1,68,000
Capital expenditure = Ending net fixed assets-Beginning net fixed assets+Depreciation = (192000-102400)-(249600-76800)+56000 =	$        -27,200
Change in NWC = Ending NWC-Beginning NWC = (112000+64000+89600-60800-22400)+(64000+44800-64000-48000-25600) =	$         83,200
FCF = OCF-Capital expenditure-Change in NWC =	$      2,24,000