Sharon Feldman, president of Allied Company, considers $20,000 to be

Sharon Feldman, president of Allied Company, considers $20,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $15,000 in cash was available at the end of 2011. Because the company reported a large net income for the year, and also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to Ms. Feldman.

Sharon Feldman, president of Allied Company, considers $20,000 to be

The following additional information is available for the year 2011:
a. The company sold long-term investments with an original cost of $30,000 for $50,000 during the year.
b. Equipment that had cost $90,000 and on which there was $40,000 in accumulated depreciation was sold during the year for $44,000.
c. The company declared and paid a cash dividend during the year.
d. The stock of a dissident stockholder was repurchased for cash and retired during the year. No issues of stock were made.
e. The company did not retire any bonds during the year.

Required:
1. Using the indirect method, compute the net cash provided by operating activities for 2011.
2. Prepare a statement of cash flows for 2011.
3. Compute free cash flow for 2011.
4. Explain the major reasons for the decline in the company€™s cashbalance.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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...