Answer Happy

P12-1A. Statement of Cash Flows (Indirect Method) The Artic Company's income statement and com- parative balance sheets at December 31 of 2019 and 2018 are shown below:: Sales revenue... Cost of goods sold Wages expense Insurance expense. Depreciation expense. Interest expense.... Income tax expense. Net income.. ARTIC COMPANY Income Statement For the Year Ended December 31, 2019 $430,000 91,000 12,000 13,000 15,000 29,000 $645,000 590,000 $ 55,000

Assets Cash. Accounts receivable. Inventory... Prepaid insurance. Plant assets Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable. Wages payable. Income tax payable Bonds payable. Common stock Retained earnings Total liabilities and stockholders' equity ARTIC COMPANY Balance Sheets .... ... ... ... ... Dec. 31, 2019 $ 41,000 41,000 90,000 5,000 219,000 (68,000) $328,000 $ 7,000 10,000 6,000 141,000 90,000 74,000 $328,000 Dec. 31, 2018 $ 8,000 32,000 65,000 7,000 202,000 (55,000) $259,000 $10,000 6,000 7,000 87,000 90,000 59,000 $259,000 Cash dividends of $40,000 were declared and paid during 2019. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi-annually on June 30 and December 31. Accounts payable relate to merchandise purchases. Required a. Calculate the change in cash that occurred during 2019. b. Prepare a statement of cash flows using the indirect method. C. Compute free cash flow. d. Compute the operating-cash-flow-to-current-liabilities ratio. operating-cash-flow-to-capital-expenditures ratio. e. Compute the rtatement and compara- LO

a. P12-1A. Statement of Cash Flows (Indirect Method) (L02, L03) Cash, December 31, 2019 Cash, December 31, 2018 Cash increase during 2019 Get this information from the balance sheet Supporting computations: The adjustments to convert the net income of $55,000 to a cash provided by operating activities of $36,000 are shown in the statement of cash flows. Purchase of Plant assets: Ending $219,000 Beginning 202,000 Change 17000 Increase Issurance of bonds payable: $ 555 $ 41,000 8,000 49,000 Example Compute the change in assets

285898398.6466£*££Ê 47 Issurance of bonds payable: Payment of dividends: Other analysis: Accumulated depreciation increased by $13,000, which is the amount of depreciation expense Common stock balance did not change Retained earnings increased by $15,000, which is the difference between the net income of $55,000 and the dividends declared of $40,000

Sheet1 Sheet2 Artic Company Statement of Cash Flows For Year Ended December 31, 2019 Cash flow from operating activities Net income Add (deduct) items to convert net income to cash basis Depreciation Accouints receivable increase Inventory increase Prepaid insurance decrease Accounts payable decrease Wages payable increase Income tax payable decrease Cash provided by operating activities Cash flow from investing activities Purchase of plant assets Cash flow from financing activities Issuance of bonds payable Payment of dividends Cash provided by financing activities Sheet) Sheett Shanth Total net income from P. & L Check Figure- $36,000 Check figure Ann. $ 55,000 55,000

5 6 7 18 09 10 11 12 B c. Compute free cash flow C D Payment of dividenas Cash provided by financing activities. Net increase in cash Cash at beginning of year Cash at end of year Sheet! E Sheet2 d. Compute the operating-cash-flow to current-liabilities ratio Sheet e. Compute the operating-cash-flow to capital-expenditures ratio Sheet4 F Check figure $14,000 Sheets Equals cash on balance sheet, beginning of year and end of year. $ 55,000 55,000 Insert computations