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Chapter 14: Q3TI (page 752)

Question: Kalapono Company expects the following for 2018:

• Net cash provided by operating activities of \(100,000.

• Net cash provided by financing activities of \)10,000.

• Net cash used for investing activities of \(20,000 (no sales of long-term assets).

• Cash dividends paid to stockholders was \)2,000.

How much free cash flow does Kalapono expect for 2018?

Short Answer

Expert verified

Answer

Free cash flow expected by Kalapono is $78,000.

Step by step solution

01

Cash flow from operating activities 

The planned investment in long-term assets is deducted from the net cash provided by operating activities. Here, net cash used for investing activities will be deducted from the cash provided by operating activities.

02

Calculation of free cash flow Kalapono expect for 2018

Particulars

Amount($)

Net cash provided by operating activities

100,000

Cash payments planned for investments in long-term assets

(20,000)

Cash dividends

(2,000)

Free cash flow

78,000

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Most popular questions from this chapter

Question: Preparing the statement of cash flows—direct method The income statement and additional data of Value Corporation follow:

  1. Collections from customers are \(13,000 more than sales.
  2. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
  3. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
  4. Payments to employees are \)3,000 more than salaries expense.
  5. Cash payment for the acquisition of plant assets is \(102,000.
  6. Cash receipts from sale of land total \)29,000.
  7. Cash receipts from issuance of common stock total \(38,000.
  8. Payment of long-term notes payable is \)10,000.
  9. Payment of dividends is \(9,000.
  10. Cash balance at June 30, 2017, was \)21,000; at June 30, 2018, it was $43,000.

Prepare Value Corporation’s statement of cash flows for the year ended June 30, 2018. Use the direct method.

Question: If current assets other than cash increase, what is the effect on cash? What about a decrease in current assets other than cash?

Using a spreadsheet to complete the statement of cash flows— indirect method

Companies can use a spreadsheet to complete the statement of cash flows. Each item that follows is recorded in the transaction analysis columns of the spreadsheet.

  1. Net income
  2. Increases in current assets (other than Cash)
  3. Decreases in current liabilities
  4. Cash payment for acquisition of plant assets
  5. Cash receipt from issuance of common stock
  6. Depreciation expense

Identify each as being recorded by a Debit or Credit in the statement of cash flows section of the spreadsheet

Question: How does the statement of cash flows help users of financial statements?

Preparing operating activities using the direct method Amy’s Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business’s statement of cash flows for the year ended June 30, 2018, using the direct method.
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