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Preparation of a statement of cash flows

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Preparation of a Statement of Cash Flows- Presented below is a condensed version of the comparative
balance sheets for Garcia Corporation for the last two years at December 31.
2008 2007

Cash $442,500 $195,000
Accounts receivable 450,000 462,500
Investments 130,000 185,000
Equipment 745,000 600,000
Less: Accumulated depreciation (265,000) (222,500)
Current liabilities 335,000 377,500
Capital stock 400,000 400,000
Retained earnings 767,500 442,500

Additional information:
Investments were sold at a loss (not extraordinary) of $25,000; no equipment was sold; cash dividends paid were
$75,000; and net income was $400,000.

Instructions
(a) Prepare a statement of cash flows for 2008 for Garcia Corporation.
(b) Determine Garcia Corporationâ??s free cash flow.

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Solution Summary

The solution prepares Statement of Cash Flows in excel format for Garcia Corporation.

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Preparation and Analysis of Statement of Cash Flows

Here are the financial statements of Warfield Company.

Compzrative Balance Sheet - December 31:
Assets 2008: Assets 2007:
Cash - $26,000 Cash - $33,000
A/R - 28,000 A/R - 14,000
Merchandise Inventory - 38,000 M/I - 25,000
Property, Plant & Equ - 70,000 P,P & E - 78,000
Less: Accu. Dep - (27,000) Less: Accu. Dep - (24,000)
Total - $135,000 Total - $126,000

Liabilities & Stockholders' Equity
2008: 2007:
A/P - $31,000 A/P - $43,000
Income Taxes Payable - 26,000 I/P - 20,000
Bonds Payable - 20,000 B/P - 10,000
Common Stock - 25,000 C/S - 25,000
Retained Earnings - 33,000 R/E - 28,000
Total - $135,000 Total - $126,000

Income Statement - For year ended December 31, 2008
Sales - $286,000
COGS - 194,000
Gross Profit - 92,000
Selling Expenses - 28,000
Administrative Exp - 9,000
Income from operations - 55,000
Interest Exp - 7,000
Income before income taxes - 48,000
Income tax expense - 7,000
Net Income - $41,000

Addtional data:
1. Dividends of $36,000 were declared and paid.
2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale.
3. All depreciation expense, $8,000, is in the selling expense category.
4. All sales and purchases are on account.
5. Additional equipment was purchased for $7,000 cash.

Prepare & Help Please. Thank you
A)Prepare a statement of cash flows using the indirect method.
B)Compute these cash-basis measures:
1) Current cash debt coverage ratio
2) Cash debt coverage ratio
3) Free cash flow

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