CORPORATE FINANCE - LL+CONNECT ACCESS
12th Edition
ISBN: 9781264054961
Author: Ross
Publisher: MCG
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Chapter 2, Problem 23QAP
Cash Flows You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $81 million in current taxes and had an interest expense of $38 million. Use the accounting statement of cash flows to construct the financial statement of cash flows.
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You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year.
You also know that the company paid $98.1 million in current taxes and had an interest expense of $48.1 million.
Operations
Net income
Depreciation
TIME MANUFACTURING
Statement of Cash Flows
(in millions)
Deferred taxes
Changes in assets and liabilities
Accounts receivable
Inventories
Accounts payable
Accrued expenses
Other
Total cash flow from operations
Investing activities
Acquisition of fixed assets
Sale of fixed assets
Total cash flow from investing activities
Financing activities
Retirement of long-term debt
Proceeds from long-term debt sales
Dividends
Repurchase of stock
Proceeds from new stock issue
Total cash flow from financing activities
Change in cash (on balance sheet)
a. Calculate the operating cash flow.
b. Calculate the net capital spending.
c. Calculate the change in net working capital.
d. Calculate the cash flow to creditors.
e. Calculate…
PREPARING A CASH FLOW STATEMTMET (INDIREECT METHOD)
Use the following balance sheet to prepare a cash flow statement for the current year. Net Income for the year
was $40,000.
ASSETS
Cash and Cash Equivalents
Accounts Receivables, Net
Inventories
Prepaid Expenses
Equipment
Accumulated Depreciation
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable
Accrued Liabilities
Long-Term Debt
Common Stock
Retained Earnings
Total Liabilities And Stockholders' Equity
Current Year
$92,000
57,000
51,000
12,000
145,000
($51,000)
$306,000
$35,000
31,000
80,000
2,000
158,000
$306,000
Prior
Year
$84,000
40,000
45,000
13,000
134,000
($37,000)
$279,000
$17,000
36,000
100,000
1,000
125,000
$279,000
Change
$8,000
$17,000
$6,000
($1,000)
$11,000
($14,000)
$27,000
$18,000
($5,000)
($20,000)
$1,000
$33,000
$27,000
The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following:a. If sales for the current year were $753,500 and accounts receivable decreased by $48,400 during the year, what was the amount of cash received from customers?b. If income tax expense for the current year was $50,600 and income tax payable decreased by $5,500 during the year, what was the amount of cash payments for income taxes?c. Briefly explain why the cash received from customers in (a) is different from sales.
Chapter 2 Solutions
CORPORATE FINANCE - LL+CONNECT ACCESS
Ch. 2 - Prob. 1CQCh. 2 - Prob. 2CQCh. 2 - Prob. 3CQCh. 2 - Prob. 4CQCh. 2 - Prob. 5CQCh. 2 - Cash Flow from Assets Why is it not necessarily...Ch. 2 - Operating Cash flow Why is it not necessarily bad...Ch. 2 - Net Working Capital and Capital Spending Could a...Ch. 2 - Cash Flow to Stockholders and Creditors Could a...Ch. 2 - Prob. 10CQ
Ch. 2 - Building a Balance Sheet Alesha, Inc., has current...Ch. 2 - Building an Income Statement Gia, Inc, has sales...Ch. 2 - Market Values and Book Values Klingon Cruisers,...Ch. 2 - Calculating Taxes Terri Simmons is single and had...Ch. 2 - Calculating OCF Sheaves, Inc., has sales of...Ch. 2 - Prob. 6QAPCh. 2 - Prob. 7QAPCh. 2 - Prob. 8QAPCh. 2 - Prob. 9QAPCh. 2 - Prob. 10QAPCh. 2 - Cash Flows Ritter Corporations accountants...Ch. 2 - Financial Cash Flows The Stancil Corporation...Ch. 2 - Building an Income Statement During the year, the...Ch. 2 - Prob. 14QAPCh. 2 - Prob. 15QAPCh. 2 - Residual Claims Stark: Inc., is obligated to pay...Ch. 2 - Net Income and OCF During 2019, Rainbow Umbrella...Ch. 2 - Prob. 18QAPCh. 2 - Prob. 19QAPCh. 2 - Prob. 20QAPCh. 2 - Prob. 21QAPCh. 2 - Prob. 22QAPCh. 2 - Cash Flows You are researching Time Manufacturing...Ch. 2 - Prob. 24QAPCh. 2 - Prob. 1MCCh. 2 - Prob. 2MCCh. 2 - Prob. 3MC
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- Use a spreadsheet and the following financial information from Mineola Companys financial statements to build a template that automatically calculates the net operating cash flow. It should be suitable for use in preparing the operating section of the statement of cash flows (indirect method) for the year 2018.arrow_forwardFinancial data for Otto Company follow: a. Compute the ratio of cash to monthly cash expenses. b. Interpret the results computed in (a).arrow_forwardUse the following information from Birch Companys balance sheets to determine net cash flows from operating activities (indirect method), assuming net income for 2018 of $122,000.arrow_forward
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- Use the following excerpts from Zowleski Companys financial information to prepare a statement of cash flows (indirect method) for the year 2018.arrow_forwardUse the following excerpts from Swansea Companys financial information to prepare the operating section of the statement of cash flows (direct method) for the year 2018.arrow_forwardYou are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $98.9 million in current taxes and had an interest expense of $48.9 million. TIME MANUFACTURINGStatement of Cash Flows($ in millions) Operations Net income $ 182.0 Depreciation 94.9 Deferred taxes 19.9 Changes in assets and liabilities Accounts receivable – 18.9 Inventories 22.9 Accounts payable 17.9 Accrued expenses – 9.9 Other 3.9 Total cash flow from operations $ 312.7 Investing activities Acquisition of fixed assets –$ 206.0 Sale of fixed assets 23.9 Total cash flow from investing activities –$ 182.1 Financing activities Retirement of long-term debt –$ 171.0 Proceeds from long-term debt sales 128.0 Dividends – 95.0…arrow_forward
- You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $98.9 million in current taxes and had an interest expense of $48.9 million. TIME MANUFACTURINGStatement of Cash Flows($ in millions) Operations Net income $ 182.0 Depreciation 94.9 Deferred taxes 19.9 Changes in assets and liabilities Accounts receivable – 18.9 Inventories 22.9 Accounts payable 17.9 Accrued expenses – 9.9 Other 3.9 Total cash flow from operations $ 312.7 Investing activities Acquisition of fixed assets –$ 206.0 Sale of fixed assets 23.9 Total cash flow from investing activities –$ 182.1 Financing activities Retirement of long-term debt –$ 171.0 Proceeds from long-term debt sales 128.0 Dividends – 95.0…arrow_forwardThe cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $375,000 and accounts receivable increased by $29,000 during the year, what was the amount of cash received from customers?$fill in the blank 1 b. If income tax expense for the current year was $39,000 and income tax payable decreased by $21,000 during the year, what was the amount of cash payments for income tax?$fill in the blank 2arrow_forwardFinding operating and free cash flows Consider the balance sheets and selected data from the income statement of Keith Corporation that follow. a. Calculate the firm's net operating profit after taxes (NOPAT) for this year. b. Calculate the firm's operating cash flow (OCF) for the year. c. Calculate the firm's free cash flow (FCF) for the year. d. Interpret, compare and contrast your cash flow estimate in parts (b) and (c). Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Assets Cash Marketable securities Accounts receivable Inventories Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and Stockholders' Equity Accounts payable Notes payable Accruals Keith Corporation Balance Sheets Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity December 31 Income…arrow_forward
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