Question: In Study Problem 3-12, you were
In Study Problem 3-12, you were asked to prepare a statement of cash flows for Abrahams Manufacturing Company. Use the information given in the problem to compute the firm’s free cash flows and the financing cash flows, and interpret your results.
Data from Study Problem 3-12:
Prepare a statement of cash flows for Abrahams Manufacturing Company for the year ended December 31, 2015. Interpret your results.
Abrahams Manufacturing Company Income Statement for the Year Ended 12/31/2015 2015
Sales.........................................................................$184,000
Cost of goods sold……………………………………………. (60,000)
Gross profit………………………………………………………. $124,000
Selling, general, and administrative expenses……44,000
Depreciation expense……………………………………. (26,000)
Operating income…………………………………………. $ 54,000
Interest expense……………………………………………… (4,000)
Earnings before taxes……………………………………..$ 50,000
Taxes 16,000 Preferred stock dividends……………...10,000
Earnings available to common shareholders……..$24,000
Additional Information
1. The only entry in the accumulated depreciation account is for 2015 depreciation.
2. The firm paid $22,000 in common stock dividends during 2015.
Transcribed Image Text:
Abrahams Manufacturing Company Balance Sheet for 12/31/2014 and 12/31/2015 2014 2015 |Cash $ 89,000 $100,000 Accounts receivable 64,000 70,000 Inventory 112,000 100,000 Prepaid expenses 10,000 10,000 Total current assets 275,000 280,000 Gross plant and equipment 238,000 311,000 Accumulated depreciation (40,000) (66,000) Total assets $473,000 $525,000 Accounts payable $ 85,000 $90,000 Accrued liabilities 68,000 63,000 Total current debt 153,000 153,000 Mortgage payable 70,000 Preferred stock 120,000 Common stock 205,000 205,000 Retained earnings 45,000 47,000 Total debt and equity $473,000 $525,000
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