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Planner Corporation's comparative balance sheets are presented below
Planner Corporation's comparative balance sheets are presented below.
PLANNER CORPORATION Comparative Balance Sheets December 31
Cash 2017 $ 21,570 2016 $ 10,700
A/R 2017 18,200 2016 23,400
Land 2017 18,000 2016 26,000
Building 2017 70,000 2016 70,000
Accumulated depreciation2017 (15,000) 2016 (10,000)
Total 2017 $112,770 2016 $120,100
Accounts payable 2017 $ 12,370 2016 $31,100
Common stock 2017 75,000 2016 69,000
Retained earnings 2017 25,400 2016 20,000
Total 2017 $112,770 2016 $120,100
Additional information: 1. Net income was $27,900. Dividends declared and paid were $22,500. 2. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $5,900.
Instruction (a) Prepare a statement of cash flows for 2017 using the indirect method. (b) Compute free cash flow.
Expert Solution
Answer:
| Statement of Cash Flows | ||
| For the Year Ended December 31, 2017 | ||
| Cash Flows from Operating Activities: | ||
| Net income | 27900 | |
| Adjustments to reconcile net income to | ||
| Net cash provided by operating activities | ||
| Depreciation expense | 5000 | |
| Loss on sale of Land | 2100 | |
| Decrease in Accounts Receivable | 5200 | |
| Decrease in accounts payable | -18730 | |
| -6430 | ||
| Net cash provided by operating activities | 21470 | |
| Cash Flows from Investing Activities: | ||
| Sale of Land | 5900 | |
| Cash Flows from Financing Activities | ||
| Payment of Cash Dividends | -22500 | |
| Issuance of Common Stock | 6000 | |
| Net Cash Used by Financing Activities | -16500 | |
| Net Increase in Cash | 10870 | |
| Cash at Beginning of Period | 10700 | |
| Cash at End of Period | 21570 | |
| b | ||
| Net cash provided by operating activities | 21470 | |
| Less: Dividends paid | -22500 | |
| Free cash flow | -1030 |
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