Question: Computing investing and financing cash flows Preston Media Corporation had the following income statement and balance sheet for 2018:
PRESTON MEDIA CORPORATION
Year Ended December 31, 2018
Sales Revenue $80,000
Depreciation Expense––Plant Assets $11,000
Other Expenses $50,000
Net Income $19,000
1. Compute the acquisition of plant assets for Preston Media Corporation during 2018. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets.
2. Compute the payment of a long-term note payable. During the year, the business issued a $4,400 note payable.
Requirement (1): cash paid to purchase new plant is $21,000.
Requirement (2): Payment of a long-term note payable is $7,400.
Plant assets (31st December, 2018)
Plant assets (31st December, 2017)
Cash paid to purchase new plant
Opening balance (31/12/2017)
Closing balance (31/12/2018)
Moss Exports is having a bad year. Net income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss’s accounts receivable are ballooning. The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company’s financial statements. Moss’s bank closely examines cash flow from operating activities. Daniel Peavey, Moss’s controller, suggests reclassifying the receivables from the slow-paying clients as long-term. He explains to the board that removing the $80,000 increase in accounts receivable from current assets will increase net cash provided by operations. This approach may help Moss get the loan.
Julie Lopez Company expects the following for 2018:
How much free cash flow does Lopez expect for 2018?
Question: Describing the purposes of the statement of cash flows Financial statements all have a goal.
The statement of cash flows does as well. Describe how the statement of cash flows helps investors and creditors perform each of the following functions:
a. Predict future cash flows.
b. Evaluate management decisions.
c. Predict the ability to make debt payments to lenders and pay dividends to stockholders.
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