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Sharon Feldman, president of Allied Company

Price: $2.50


Sharon Feldman, president of Allied Company, considers $20,000 to be a minimum cash balance
for operating purposes. As can be seen from the following statements, only $15,000 in cash was
available at the end of 2011. Because the company reported a large net income for the year, and
also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to


The following additional information is available for the year 2011:
a. The company sold long-term investments with an original cost of $30,000 for $50,000 during
the year.
b. Equipment that had cost $90,000 and on which there was $40,000 in accumulated depreciation
was sold during the year for $44,000.
c. The company declared and paid a cash dividend during the year.
d. The stock of a dissident stockholder was repurchased for cash and retired during the year. No
issues of stock were made.
e. The company did not retire any bonds during the year.

Required:
1. Using the indirect method, compute the net cash provided by operating activities for 2011.
2. Prepare a statement of cash flows for 2011.
3. Compute free cash flow for 2011.

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