Question

Reed Corporation’s income statement for the year ended June 30, 2014, and its comparative balance sheets as of June 30, 2014 and 2013, follow.


During 2014, the corporation sold at a loss of $8,000 equipment that cost $48,000, on which it had accumulated depreciation of $34,000. 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 $160,000 in 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. What are the primary reasons for Reed’s large increase in cash from 2013 to 2014?
3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) How would you assess the corporation’s cash-generatingability?


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  • CreatedMarch 26, 2014
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