Question

The following is a condensed version of the comparative balance sheets for Sweet Corporation for the last two years at December 31.
2020 2019
Cash $274,350 $120,900
Accounts receivable 279,000 286,750
Investments 80,600 114,700
Equipment 461,900 372,000
Accumulated Depreciation-Equipment (164,300 ) (137,950 )
Current liabilities 207,700 234,050
Common stock 248,000 248,000
Retained earnings 475,850 274,350

Additional information:

Investments were sold at a loss of $22,000; no equipment was sold; cash dividends paid were $66,000; and net income was $352,000.

Required:
a. Prepare a statement of cash flows for 2020 for Shira Corporation.
b. Determine Shira Corporation’s free cash flow.

Answer 1

Answer:

Cash flow from operating activities

Net income                                                      $352,000

Adjustment to reconcile net income to

net Cash flow from operating activities

Depreciation expense                                    $26,350

Loss on investment sold                                 $15,500

Decrease account receivable                         $7,750

Decrease current liabilities                            -$26,350

Net cash flow from operating activities                              $348,250

Cash flow from investing activities

Sale of investment                                           $12,100

Purchase of equipment                                 -$89,900

Net cash used investing activities                                       -$77,800

Cash flow from financing activities

Dividend paid                                                  -$66,000  

Net cash used financing activities                                       -$66,000

Net cash increase (decrease)                                              $204,450

Beginning Cash                                                                     $120,900

Ending Cash                                                                          $325,350