PREPARING THE STATEMENT OF CASH FLOWS
The comparative balance sheets for Beckwith Products Company are presented below.
|
Assets:
|
2009
|
2008
|
|
Cash
|
$ 36,400
|
$ 25,000
|
|
Accounts receivable
|
63,000
|
78,000
|
|
Inventory
|
45,300
|
36,000
|
|
Property, plant, and equipment
|
221,000
|
153,000
|
|
Accumulated depreciation
|
(30,000)
|
(20,000)
|
|
Total assets
|
$335,700
|
$272,000
|
|
Liabilities and Equity:
|
|
|
|
Accounts payable
|
$ 13,100
|
$ 11,000
|
|
Interest payable
|
13,500
|
8,000
|
|
Wages payable
|
4,100
|
9,000
|
|
Notes payable
|
75,000
|
90,000
|
|
Common stock
|
90,000
|
50,000
|
|
Retained earnings
|
140,000
|
104,000
|
|
Total liabilities and equity
|
$335,700
|
$272,000
|
Additional information:
1. Net income for 2009 was $52,000.
2. Cash dividends of $16,000 were declared and paid during 2009.
3. During 2009, Beckwith issued $20,000 of notes payable and repaid $35,000 princi- pal relating to notes payable.
4. Common stock was issued for $40,000 cash.
5. Depreciation expense was $10,000, and there were no disposals of equipment.
Required:
1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2009.
2. Compute the following cash-based performance measures:
a. Free cash flow
b. Cash flow adequacy (assume that the average amount of debt maturing over the next five years is $85,000).
3. List the major reasons for the difference between net income and net cash flow from operating activities.