Question: Presented below are the financial statements of
Presented below are the financial statements of Warner Company.
Additional data:
1. Depreciation expense was $17,500.
2. Dividends declared and paid were $20,000.
3. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had accumulated depreciation of $9,500 at the time of sale.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute free cash flow.
Transcribed Image Text:
WARNER COMPANY Comparative Balance Sheets December 31 2017 $ 35,000 Assets 2016 Cash $ 20,000 Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation 20,000 28,000 60,000 14,000 20,000 78,000 (24,000) (32,000) Total $111,000 $108,000 Liabilities and Stockholders' Equity $ 19,000 7,000 17,000 18,000 $ 15,000 Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 8,000 33,000 14,000 38,000 50,000 Total $111,000 $108,000 WARNER COMPANY Income Statement For the Year Ended December 31, 2017 Sales revenue $242,000 Cost of goods sold 175,000 Gross profit Selling expenses Administrative expenses 67,000 $18,000 6,000 24,000 Income from operations Interest expense 43,000 3,000 Income before income taxes 40,000 8,000 Income tax expense Net income $ 32,000
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