Chapter 11, Problem 24BE

Preparing a statement of cash flows—indirect method (Learning Objective 3) 20-25 min.

The income statement and additional data of Amalgamated Services, Inc., follow:

Amalgamated Services, Inc. Income Statement Year Ended June 30, 2018
		Revenues
		Sales Revenue	$281,000
		Dividend Revenue	10,000
		Total Revenues		$291,000
		Expenses:
		Cost of Goods Sold	$101,000
		Salaries Expense	60,000
		Depreciation Expense	17,000
		Advertising Expense	15,000
		Interest Expense	3,000
		income Tax Expense	14,000
		Total Expenses		210,000
		Net Income		$ 81,000

Additional data:

1. a. Acquisition of fixed assets totaled $115,000. Of this amount, $85,000 was paid in cash; a $30,000 note payable was signed for the remainder.
2. b. Proceeds from the sale of land totaled $21,000. No gain or loss was recognized on the sale.
3. c. Proceeds from issuance of common stock total $34,000.
4. d. Payment of a long-term note payable was $17,000.
5. e. Payment of dividends was $11,000.
6. f. Data from the comparative balance sheet follow:

June 30	2018	2017
Current Assets:
Cash..............................................................................	$61,000	$28,000
Accounts Receivable...................................................	26,000	35,000
Inventory...................................................................	39,000	25,000
Current Liabilities:
Accounts Payable........................................................	$28,000	$17,000
Accrued Liabilities.......................................................	15,000	28,000

Requirements

1. 1. Prepare Amalgamated Services’ statement of cash flows for the year ended June 30, 2018, using the indirect method.
2. 2. Calculate Amalgamated Services free cash flow for the year ended June 30, 2018.
3. 3. Evaluate Amalgamated Services’ cash flows for the year. In your evaluation, mention all three categories of cash flows as well as free cash flow and give the reason for your evaluation.