Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
26th Edition
ISBN: 9781305392373
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 16, Problem 16.8BPE
a.
To determine
Free cash flow is defined as an evaluation of financial performance of a company. It shows the cash which is generated after paying on capital expenditures. Such cash is used for production, expansion, development of new products, and acquisitions.
The following formula is used to calculate free cash flow.
D’s free cash flow for both years.
b.
To determine
To Explain: Whether free cash flow has improved or declined from 2015 to 2016.
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Calculate the Cash Flows in the Statement of Cash Flows below from the provided Balance sheet
and Income Statement
BALANCE SHEET (in millions of dollars)
INCOME STATEMENT (in millions of dollars)
2015
2014
2015
2014
Assets
Net sales
$3,000.0 $2,850.0
Cash and equivalents
10 $
80
Operating costs except depreciation and amortizatio
2,616.2
2,497.0
90.0
100.0
Accounts receiva ble
375
315
Depreciation and amortization
$ 283.8 $ 263.0
Inventories
615
415
Earnings before interest and taxes (EBIT)
Total current asse ts
$ 1,000 $
810
Less interest
88.0
60.0
$ 195.8 $ 203.0
Net plant and equipment
1,000
870
Earnings before taxes (EBT)
$ 2,000 1,680
Total assets
Taxes
78.3
81.2
117.5 $ 121.8
Net income
Liabilities and Equity
Common dividends
57.5
53.0
Addition to re tained earnings
Accounts payable
$
$
60 $
30
60.0 $
68.8
Accruals
140
130
Notes payable
110
60
Tax rate
40%
40%
310 $
Total current liabilities
220
Long-term bonds
750
580
$ 1,060 $
Total liabilities
800
Common stock (50,000,000…
Given the information below, determine the free cash flow for 2014.
Income Statement (In Thousands)
Sales
Operating costs
EBITDA
Depreciation
Earnings before interest and taxes
Interest (8%)
Earnings before taxes
Taxes (40%)
Net income
Common dividends
Balance Sheet (In Thousands)
Assets:
Cash and marketable securities
Accounts receivable
Inventories
Total current assets
Net fixed assets (PP&E)
Total assets
Liabilities and equity:
Accounts payable
Notes payable
Accruals
2014
$24,800.00
-$14,880.00
$9,920.00
-$920.00
$9,000.00
-$112.00
$8,888.00
$7.840.00
-$3,555.20 -$3,136.00
$5,332.80 $4,704.00
$2,082.00
$2,352.00
2014
2013
$22,000.00
$13,200.00
$8,800.00
-$800.00
$8,000.00
-$160.00
$1,200.00
$5,565.00
$7.440.00
$14,205.00
$9,200.00
$23,405.00
2013
$1,000.00
$5,000.00
$6,000.00
$12,000.00
$8,000.00
$20,000.00
$6,500.00
$6,000.00
$400.00 $1,000.00
$3.254.20 $3,000.00
In its 2017 annual report, Allen
Company reports the following (in
thousands): 2017 2016 Total revenue
$102,500 $99,400 Property, plant,
equipment, gross 41,300 38,700
Property, plant, equipment, net
16,540 14,905 Depreciation expense
1,935 1,655 If revenue growth is
projected to be 5%, the 2018
forecasted depreciation expense to
be added back on the statement of
cash flows is: A. $1,935 thousand B.
$2,147 thousand C. $1,766 thousand
D. $2,065 thousand E. None of the
above
disregard
Chapter 16 Solutions
Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
Ch. 16 - What is the principal disadvantage of the direct...Ch. 16 - Prob. 2DQCh. 16 - A corporation issued 2,000,000 of common stock in...Ch. 16 - A retail business, using the accrual method of...Ch. 16 - Prob. 5DQCh. 16 - A long-term investment in bonds with a cost of...Ch. 16 - A corporation issued 2,000,000 of 20-year bonds...Ch. 16 - Fully depreciated equipment costing 50,000 is...Ch. 16 - Prob. 9DQCh. 16 - Name five common major classes of operating cash...
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