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Calculation of depreciation to add back to Net Income: Accumulated Depreciation, beginning balance Accumulated Depreciation, ending balance Debits to Accumulated Depreciation Credits to Accumulated Depreciation Changes in noncash balance sheet accounts that impact net income: Increase in Account Balance Current Assets Accounts receivable Inventory Prepaid expenses Decrease in Account Balance Current Liabilities Accounts Payable Accrued liabilities Income taxes payable Changes in noncash balance sheet accounts that impact investing and financing: Noncurrent Assets Property, plant, and equipment Long-term investments Increase in Account Balance Decrease in Account Balance Liabilities and Stockholders’ equity Bonds payable Common stock Property, Plant and Equipment Property, Plant and Equipment, beginning balance Property, Plant and Equipment, ending balance Debits to Property, Plant and Equipment Credits to Property, Plant and Equipment Retained Earnings Retained Earnings, beginning balance Retained Earnings, ending balance Debits to Retained Earnings Credits to Retained Earnings ALLIED COMPANY Statement of Cash Flows For the Year Ended December 31, 2011 Operating activities: Net income Adjustments needed to convert net income to a cash basis: Net cash provided by operating activities Investing activities: Net cash used for investing activities Financing activities: Net cash provided by financing activities Net decrease in cash Cash balance, Beginning of year Cash balance, End of year 3. Free cash flow computation Net cash provided by operating activities Capital expenditures Dividends Free cash flow Given Data P14-14: Minimum cash balance $20,000 ALLIED COMPANY Comparative Balance Sheet December 31, 2011, and 2010 2011 2010 Assets Current assets: Cash Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets $15,000 200,000 250,000 7,000 472,000 90,000 860,000 210,000 650,000 $1,212,000 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $175,000 Accrued liabilities $8,000 Income taxes payable 42,000 Total current liabilities 225,000 Bonds payable 200,000 Total liabilities 425,000 Stockholders’ equity: Common stock 595,000 Retained earnings 192,000 Total stockholders’ equity 787,000 Total liabilities and stockholders’ equity $1,212,000 $33,000 210,000 196,000 15,000 454,000 120,000 750,000 190,000 560,000 $1,134,000 $230,000 $15,000 39,000 284,000 100,000 384,000 600,000 150,000 750,000 $1,134,000 ALLIED COMPANY Income Statement For the Year Ended December 31, 2011 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sales of equipment Income before taxes Income taxes Net income $800,000 500,000 300,000 214,000 86,000 $20,000 6,000 Additional information: Long-term investment cost Long-term investment sale Equipment cost Equipment accumulated depreciation Equipment selling price Dividends declared and paid Stock was repurchased for cash $30,000 $50,000 $90,000 $40,000 $44,000 ? ? 14,000 100,000 30,000 $70,000

Calculation of depreciation to add back to Net Income:
Accumulated Depreciation, beginning balance
Accumulated Depreciation, ending balance
Debits to Accumulated Depreciation
Credits to Accumulated Depreciation
Changes in noncash balance sheet accounts that impact net income:
Increase in
Account
Balance

Current Assets
Accounts receivable
Inventory
Prepaid expenses

Decrease in
Account
Balance

Current Liabilities
Accounts Payable
Accrued liabilities
Income taxes payable
Changes in noncash balance sheet accounts that impact investing and financing:

Noncurrent Assets
Property, plant, and equipment
Long-term investments

Increase in
Account
Balance

Decrease in
Account
Balance

Liabilities and Stockholders’ equity
Bonds payable
Common stock
Property, Plant and Equipment
Property, Plant and Equipment, beginning balance
Property, Plant and Equipment, ending balance
Debits to Property, Plant and Equipment
Credits to Property, Plant and Equipment
Retained Earnings
Retained Earnings, beginning balance
Retained Earnings, ending balance
Debits to Retained Earnings
Credits to Retained Earnings

ALLIED COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2011
Operating activities:
Net income
Adjustments needed to convert net income to a cash basis:

Net cash provided by operating activities
Investing activities:

Net cash used for investing activities
Financing activities:

Net cash provided by financing activities
Net decrease in cash
Cash balance, Beginning of year
Cash balance, End of year

3. Free cash flow computation
Net cash provided by operating activities
Capital expenditures
Dividends
Free cash flow

Given Data P14-14:
Minimum cash balance

$20,000
ALLIED COMPANY
Comparative Balance Sheet
December 31, 2011, and 2010
2011

2010

Assets
Current assets:
Cash
Accounts receivable
Inventory
Prepaid expenses
Total current assets
Long-term investments
Plant and equipment
Less accumulated depreciation
Net plant and equipment
Total assets

$15,000
200,000
250,000
7,000
472,000
90,000
860,000
210,000
650,000
$1,212,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$175,000
Accrued liabilities
$8,000
Income taxes payable
42,000
Total current liabilities
225,000
Bonds payable
200,000
Total liabilities
425,000
Stockholders’ equity:
Common stock
595,000
Retained earnings
192,000
Total stockholders’ equity
787,000
Total liabilities and stockholders’ equity
$1,212,000

$33,000
210,000
196,000
15,000
454,000
120,000
750,000
190,000
560,000
$1,134,000

$230,000
$15,000
39,000
284,000
100,000
384,000
600,000
150,000
750,000
$1,134,000

ALLIED COMPANY
Income Statement
For the Year Ended December 31, 2011
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Nonoperating items:
Gain on sale of investments
Loss on sales of equipment
Income before taxes
Income taxes
Net income

$800,000
500,000
300,000
214,000
86,000
$20,000
6,000

Additional information:
Long-term investment cost
Long-term investment sale
Equipment cost
Equipment accumulated depreciation
Equipment selling price
Dividends declared and paid
Stock was repurchased for cash

$30,000
$50,000
$90,000
$40,000
$44,000
?
?

14,000
100,000
30,000
$70,000

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