The comparative balance sheets for Karidis Ceramics, Inc., for December 31, 209 and 208 are presented on

The comparative balance sheets for Karidis Ceramics, Inc., for December 31, 20×9 and 20×8 are presented on the next page. During 20×9, the company had net income of $96,000 and building and equipment depreciation expenses of $80,000 and $60,000, respectively. It amortized intangible assets in the amount of $20,000; purchased investments for $116,000; sold investments for $150,000, on which it recorded a gain of $34,000; issued $240,000 of long-term bonds at face value; purchased land and a warehouse through a $320,000 mortgage; paid $40,000 to reduce the mortgage; borrowed $60,000 by issuing notes payable; repaid notes payable in the amount of $180,000; declared and paid cash dividends in the amount of $36,000; and purchased treasury stock in the amount of $20,000.

Karidis Ceramics, Inc.

Comparative Balance Sheets

December 31, 20x9 and 20x8

Liabilities and Stockholders' Equity

Required
1. Using the indirect method, prepare a statement of cash flows for Karidis Ceramics, Inc.
2. Why did Karidis Ceramics experience a decrease in cash in a year in which it had a net income of $96,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 20×9. Why is each of these measures important in assessing cash-generating ability?

Transcribed Image Text:

20x9 20x8 Assets Cash Accounts receivable (net) Inventory Prepaid expenses Long-term investments Land Building Accumulated depreciation, building Equipment Accumulated depreciation, equipment Intangible assets Total assets 257,600 305,600 758,800 800,000 26,800 440,000 321,200 920,000 738,800 960,000 14,800 440,000 361,200 1,200,000 (240,000) (160,000) 480,000 (56,000) 40,000 $4,116,400 3,876,400 480,000 (116,000) 20,000 Accounts payable Notes payable (current) Accrued liabilities Mortgage payable Bonds payable Common stock Additional paid-in capital Retained earnings Treasury stock Total liabilities and stockholders' equity $470,800 660,800 160,000 20,800 800,000 760,000 1,300,000 80,000 194,800 40,000 10,800 1,080,000 1,000,000 1,300,000 80,000 254,800 120,000)(100,000) $4,116,400 3,876,400