Question

Data for Johnston Company are presented in P13-7B. Further analysis reveals the following.
1. Accounts payable pertains to merchandise creditors.
2. All operating expenses except for depreciation are paid in cash.
In P13-7B, Presented below are the financial statements of Johnston Company.


JOHNSTON COMPANY
Income Statement
For the Year Ended December 31, 2015
Sales revenue .............. $286,000
Cost of goods sold ........... 204,000
Gross profit .............. 82,000
Operating expenses ........... 37,000
Income from operations .......... 45,000
Interest expense ............. 7,000
Income before income taxes ........ 38,000
Income tax expense ............ 10,000
Net income .............. $ 28,000

Additional data:
1. Dividends of $23,000 were declared and paid.
2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale.
3. All depreciation expense, $8,000, is in the operating expenses.
4. All sales and purchases are on account.
5. Additional equipment was purchased for $7,000 cash.

Instructions
(a) Prepare a statement of cash flows using the direct method.
(b) Compute free cashflow.


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  • CreatedFebruary 17, 2014
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