Question

Suppose that Maroney Corporation produced and sold 4,800 laptop computers during the year. It reported $140,000 cash provided by operating activities. In order to maintain production at 4,800 laptops, Maroney paid $35,000 for equipment. Maroney paid $10,000 in dividends and it paid a $25,000 note payable. Shortly before year-end, Maroney received $20,000 by issuing additional shares of its stock. What is Maroney’s free cash flow? Group of answer choices $70,000 $95,000 $115,000 $130,000 $90,000

Answer 1

Answer:

$95,000

Explanation:

The computation of the free cash flow is shown below:

= Operating activities - capital expenditure - dividend paid

= $140,000 - $35,000 - $10,000

= $95,000

The dividend is also a part of the capital expenditure, that's why we deduct it.

The notes payable is already included in the operating activity, so no treatment is done, and the additional shares are also not be considered in the computation part. Hence, ignored it.