Preparation and Statement Analysis of Cash Flows
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Flanders Corporation's income statement for the year ended June 30, 20x8 and its a comparative balance sheets as if June 30, 20x8 and 20x7 are attached. During 20x8, the corporation sold equipment that cost $48,000, on which it had accumulated depreciation of $34,000, at a loss of $8,000. It also purchased land and a building for $200,000 through an increase of $200,000 in Mortgage Payable; made a $40,000 payment on the mortgage; repaid notes but borrowed an additional $60,000 through the issuance of a new note payable; and declared and paid a $120,000 cash dividend.
Required:
1. Using the indirect method, prepare a statement of cash flows. Include a supporting schedule of noncash investing and financing transactions.
2. User Insight: What are the primary reasons for Flander's Corporation's large increase in cash from 20x7 to 20x8?
3. User Insight: Compute and assess cash flow yield and free cash flow for 20x8. How would you assess the corporation's cash-generating ability?
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Solution Summary
The solution prepares and analyses the statement of cash flows. The indirect method is used to assess cash flow yields.
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