Reference no: EM13939740

PREPARING THE STATEMENT OF CASH FLOWS

The comparative balance sheets for Beckwith Products Company are presented below.

Assets:	2009	2008
Cash	$ 36,400	$ 25,000
Accounts receivable	63,000	78,000
Inventory	45,300	36,000
Property, plant, and equipment	221,000	153,000
Accumulated  depreciation	(30,000)	(20,000)
Total assets	$335,700	$272,000
Liabilities and Equity:
Accounts payable	$ 13,100	$ 11,000
Interest payable	13,500	8,000
Wages payable	4,100	9,000
Notes payable	75,000	90,000
Common stock	90,000	50,000
Retained earnings	140,000	104,000
Total liabilities and equity	$335,700	$272,000

Additional information:

1. Net income for 2009 was $52,000.

2. Cash dividends of $16,000 were declared and paid during 2009.

3. During 2009, Beckwith issued $20,000 of notes payable and repaid $35,000 princi- pal relating to notes payable.

4. Common stock was issued for $40,000 cash.

5. Depreciation expense was $10,000, and there were no disposals of equipment.

Required:

1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2009.

2. Compute the following cash-based performance measures:

a. Free cash flow

b. Cash flow adequacy (assume that the average amount of debt maturing over the next five years is $85,000).

3. List the major reasons for the difference between net income and net cash flow from operating activities.