Data for Rocastle Company are presented in P17-7B. Further analysis reveals the following.
1. Accounts payable pertains to merchandise creditors.
2. All operating expenses except for depreciation are paid in cash.
Instructions
(a) Prepare a statement of cash flows using the direct method.
(b) Compute free cash flow.
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MINNIE HOOPER COMPANY
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Comparative Balance Sheets
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December 31
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Assets
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2012
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2011
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Cash
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$102,700
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$ 33,400
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Accounts receivable
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60,800
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37,000
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Inventory
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126,900
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102,650
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Investments
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79,500
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107,000
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Plant assets
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315,000
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205,000
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Accumulated depreciation
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(44,500)
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(40,000)
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Total
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$640,400
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$445,050
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Liabilities and Stockholders' Equity
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Accounts payable
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$ 57,700
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$ 48,280
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Accrued expenses payable
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15,100
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18,830
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Bonds payable
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145,000
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70,000
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Common stock
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250,000
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200,000
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Retained earnings
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172,600
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107,940
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Total
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$640,400
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$445,050
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MINNIE HOOPER COMPANY
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Income Statement
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For the Year Ended December 31, 2012
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Sales revenue
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$297,500
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Gain on sale of plant assets
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5,000
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Less:
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302,500
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Cost of goods sold
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$99,460
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Operating expenses, excluding
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depreciation expense
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19,670
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Depreciation expense
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30,500
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Income taxes
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37,270
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Interest expense
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2,940
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189,840
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Net income
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$112,660
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Additional information:
1. New plant assets costing $146,000 were purchased for cash during the year.
2. Investments were sold at cost.
3. Plant assets costing $36,000 were sold for $15,000, resulting in a gain of $5,000.
4. A cash dividend of $48,000 was declared and paid during the year.
Instructions
Prepare a statement of cash flows using the indirect method.