Kohl Ceramics, Inc.’s comparative balance sheets, for December 31, 2014 and 2013, follow.

During 2014, the company had net income of $192,000 and building and equipment depreciation expenses of $160,000 and $120,000, respectively. It amortized intangible assets in the amount of $40,000; purchased investments for $232,000; sold investments for $300,000, on which it recorded a gain of $68,000; issued $480,000 of long-term bonds at face value; purchased land and a warehouse through a $640,000 mortgage; paid $80,000 to reduce the mortgage; borrowed $120,000 by issuing notes payable; repaid notes payable in the amount of $360,000; declared and paid cash dividends in the amount of $72,000; and purchased treasury stock in the amount of $40,000.

1. Using the indirect method, prepare a statement of cash flows for Kohl Ceramics.
2. Why did Kohl Ceramics experience a decrease in cash in a year in which it had a net income of $192,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 2014. Why is each of these measures important in assessing cash-generatingability?

  • CreatedMarch 26, 2014
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