Textbook Problem

Preparing the Statement of Cash Flows

The comparative balance sheets for Beckwith Products Company are presented below.

Additional Information:

1. Net income for 2019 was $58,400.

2. Cash dividends of $25,000 were declared and paid during 2019.

3. During 2019, Beckwith issued $50,000 of notes payable and repaid $35,000 principal relating to notes payable.

4. Common stock was issued for $50,000 cash.

5. Depreciation expense was $18,650, and there were no disposals of equipment.

Required:

1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2019.

2. Compute the following cash-based performance measures: (a) free cash flow and (b) cash flow adequacy. ( Note: Assume that the average amount of debt maturing over the next 5 years is $85,000. Round ratio to two decimal places.)

3. CONCEPTUAL CONNECTION What can you conclude by examining the patterns in Beckwith’s cash flows?