William Corporations income statement for the year ended December 31, 2014, and its comparative balance sheets as

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William Corporation€™s income statement for the year ended December 31, 2014, and its comparative balance sheets as of December 31, 2014 and 2013, follow.

William Corporation€™s income statement for the year ended December 31,

During 2014, William engaged in these transactions:
a. Sold at a gain of $7,000 furniture and fixtures that cost $35,600, on which it had accumulated depreciation of $28,800.
b. Purchased furniture and fixtures in the amount of $39,600.
c. Paid a $20,000 note payable and borrowed $40,000 on a new note.
d. Converted bonds payable in the amount of $100,000 into 4,000 shares of common stock.
e. Declared and paid $6,000 in cash dividends.

Required
1. Using the indirect method, prepare a statement of cash flows for William. Include a supporting schedule of noncash investing transactions and financing transactions.
2. What are the primary reasons for William€™s large increase in cash from 2013 to 2014, despite its low net income?
3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) Compare and contrast what these two performance measures tell you about William€™s cash-generatingability.

Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...
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Principles of Accounting

ISBN: 978-1133626985

12th edition

Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson

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