Q No 5 (7 Marks)

1. What is cash flow statement? why we use indirect method to prepare cash flow statement? Briefly explain operating, investing, and financing activities? (03)
2. Prepare cash flow statement for Dec 31, 2008 using indirect method (04)

2007 Corrigan Corporation: Balance Sheets as of December 31 2008 Cash $ 72,000 Accounts receivable 439,000 Inventories 894,000 Total current assets $1,405,000 Land and building 238,000 Machinery 132,000 Other fixed assets 61,000 Total assets $1,836,000 Accounts and notes payable $ 432,000 Accrued liabilities 170,000 Total current liabilities $ 602,000 Long-term debt 404,290 Common stock 575,000 Retained earnings 254.710 Total liabilities and equity $1,836,000 $ 65,000 328,000 813,000 $1,206,000 271.000 133,000 57,000 $1,667,000 $ 409,500 162.000 $ 571,500 258,898 575,000 261,602 $1,667,000 Corrigan Corporation: Income Statements for Years Ending December 31 2008 2007 Sales $4,240,000 $3,635,000 Cost of goods sold _3,680,000 _2,980,000 Gross operating profit $ 560,000 $ 655,000 General administrative and selling expenses 236,320 213,550 Depreciation 159,000 154,500 Miscellaneous 134,000 127,000 Earnings before taxes (EBT) $ 30,680 $ 159,950 Taxes (40%) 12,272 63,980 Net income $ 18,408 $ 95,970 Per-Share Data EPS Cash dividends Market price (average) P/E ratio Number of shares outstanding 2008 $0.80 $1.10 $12.34 15.4x 23,000 2007 $4.17 $0.95 $23.57 5.65x 23,000 |