William Corporation-Statement of Cash Flows: Indirect Method

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William Corporation-Statement of Cash Flows: Indirect Method
Statement of Cash Flows: Indirect Method
p10. William Corporation’s income statement for the year ended December 31, 2014, and its comparative balance sheets as of December 31, 2014 and 2013, follow. William Corporation Income Statement
For the Year ended December 31, 2014
Sales
$1,609,000
Cost of goods sold
1,127,800
Gross margin
$ 481,200
Operating expenses (including depreciation expense of $46,800)
449,400
Income from operations
$ 31,800
Other income (expenses)
Gain on sale of furniture and fixtures
$ 7,000
Interest expense
(23,200)
(16,200)
Income before income taxes
$ 15,600
Income taxes expense
4,600
Net income
$ 11,000
William Corporation Comparative Balance Sheets
December 31, 2014 and 2013 2014 2013
Assets
Cash $164,800 $ 50,000
Accounts receivable (net) 165,200 200,000
Merchandise inventory 350,000 450,000
Prepaid rent 2,000 3,000
Furniture and fixtures 148,000 144,000
Accumulated depreciation—furniture and fixtures (42,000) (24,000)
Total assets $788,000 $823,000
Liabilities and Stockholders’ equity
Accounts payable
$143,400
$200,400
Income taxes payable
1,400
4,400
Notes payable (long-term)
40,000
20,000
Bonds payable
100,000
200,000
Common stock, $20 par value
240,000
200,000
Additional paid-in capital
181,440
121,440
Retained earnings
81,760
76,760
Total liabilities and stockholders’ equity
$788,000
$823,000
During 2014, William engaged in these transactions:
a. Sold at a gain of $7,000 furniture and fixtures that cost $35,600, on which it had accumulated depreciation of $28,800.
b. Purchased furniture and fixtures in the amount of $39,600.
c. Paid a $20,000 note payable and borrowed $40,000 on a new note.
d. Converted bonds payable in the amount of $100,000 into 4,000 shares of common stock.
e. Declared and paid $6,000 in cash dividends.
required
1. Using the indirect method, prepare a statement of cash flows for William. Include a supporting schedule of noncash investing transactions and financing transactions.
2. accounting Connection ? What are the primary reasons for William’s large increase in cash from 2013 to 2014, despite its low net income?
3. Business application ? Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) Compare and contrast what these two performance measures tell you about William’s cash-generating ability.
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