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    Computing the Components of a Statement of Cash Flows

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    Equipment that had cost $30,000 and on which there was accumulated depreciation of $10,000
    was sold during Year 2 for $26,000. The company declared and paid a cash dividend during Year 2.
    It did not retire any bonds or repurchase any of its own stock.

    Required:
    1. Using the indirect method, compute the net cash provided by operating activities for Year 2.
    2. Prepare a statement of cash flows for Year 2.
    3. Compute the free cash flow for Year 2.
    4. Briefly explain why cash declined so sharply during the year.

    © BrainMass Inc. brainmass.com June 4, 2020, 4:29 am ad1c9bdddf
    https://brainmass.com/business/accounting-rate-of-return/563760

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    Solution Summary

    This solution illustrates how to compute the changes in key accounts used in constructing a statement of cash flows using the indirect method, as well as how to prepare the statement and how to compute free cash flow.

    $2.19

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