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Accounting 301 Cash flows case | Complete Solution
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Accounting 301, Intermediate Accounting, Spring 2015
Cash flows case:  (indirect method).
The net changes in the balance sheet accounts of Dubai, Inc. for the year 2015 are shown below:
Account       Debit           Credit    
Cash        $   95,600
Accounts receivable        $     64,000
Allowance for doubtful accounts        10,000
Inventory    197,200
Prepaid expenses    20,000
Long-term investments        144,000
Land        400,000
Buildings    650,000
Machinery    100,000
Equipment        28,000
Accumulated depreciation:
Buildings        24,000
Machinery        20,000
Equipment            12,000
Accounts payable    183,200
Accrued liabilities     72,000
Dividends payable    128,000
Premium on bonds    36,000
Bonds payable        900,000
Preferred stock ($50 par)60,000
Common stock ($10 par)    156,000
Additional paid-in capital—common 223,200
Retained earnings    87,200        
$1,805,200           $1,805,200

 


Additional information:
1.Income Statement Data for Year Ended December 31, 2015        
    Income before extraordinary item    $272,000
    Extraordinary loss:  Condemnation of land      132,000
    Net income    $140,000
2.Cash dividends of $128,000 were declared December 15, 2015, payable January 15, 2016. A 5% stock dividend was issued March 31, 2015, when the market value was $22.00 per share.

3.The long-term investments were sold for $140,000.

4.A building and land which cost $480,000 and had a book value of $350,000 were sold for $400,000. The cost of the land, included in the cost and book value above, was $20,000.

5.The following entry was made to record an exchange of an old machine for a new one:
Machinery                    160,000
Accumulated Depreciation—Machinery 40,000
Machinery                60,000
Cash                        140,000

6.A fully depreciated copier machine which cost $28,000 was written off.

7.Preferred stock of $60,000 par value was redeemed for $80,000.

8.The company sold 12,000 shares of its common stock ($10 par) on June 15, 2015 for $25 a share. There were 87,600 shares outstanding on December 31, 2015.

9.Bonds were sold at 104 on December 31, 2015.

10.Land that was condemned had a book value of $240,000.

 11.Beginning Cash balance was $0

Instructions
1.Prepare a statement of cash flows (indirect method). Ignore tax effects.
2.What is the free cash
3.What are the advantages of using the statement of cash flows for businesses

 

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Accounting 301 Cash flows case | Complete Solution
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  • Submitted On 05 May, 2015 11:17:58
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Yes Free cash flow is a negative number. Companies that spend too much on capital expenditure (growth) will hav...
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