Cash Flow Assignment - Background Info.
Below you are given an income statement (similar to what you put together in the Week 2 - Income Statement Assignment) for the Crosby Corporation for the year ending 2011. Additionally you have been given comparative balance sheets for the years 2010 and 2011. Use the information below to create a statement of cash flows for the Crosby Corporation to answer the questions at the bottom (which are the same questions you will encounter when turning in the Week 2 - Cash Flow Assignment in Blackboard). Please be sure to read the sections in chapter 2 on Cash Flow Statements before attempting this assignment.
Crosby Corporation
Income statement
For the year ended December 31, 2011
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Sales
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$2,200,000
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Cost of goods sold
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$1,300,000
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Gross profit
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$900,000
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Selling and administrative expense
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$420,000
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Depreciation expense
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$150,000
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Operating income
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$330,000
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Interest expense
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$90,000
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Earnings before taxes
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$240,000
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Taxes
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$80,000
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Earnings after taxes
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$160,000
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Preferred stock dividends
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$10,000
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Earnings available to common stockholders
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$150,000
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Shares outstanding
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$120,000
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Earnings per share
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$1.25
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Statement of Retained Earnings
For the year ended December 31, 2011
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Retained earnings, balance, January 1, 2011
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$500,000
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Add: earnings available to common stockholders, 2011
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$150,000
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Deduct: cash dividends declared and paid in 2011
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$50,000
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Retained earnings, balance, December 31, 2011
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$600,000
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Comparative Balance Sheets for 2010 and 2011
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Assets
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Year-end
2010
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Year-end 2011
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Current assets:
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|
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Cash
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$70,000
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$100,000
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Accounts receivable (net)
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$300,000
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$350,000
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Inventory
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$410,000
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$430,000
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Prepaid expenses
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$50,000
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$30,000
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Total current assets
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$830,000
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$910,000
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Investments (long-term securities)
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$80,000
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$70,000
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Plant and equipment
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$2,000,000
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$2,400,000
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Less: accumulated depreciation
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$1,000,000
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$1,150,000
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Net plant and equipment
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$1,000,000
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$1,250,000
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Total assets
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$1,910,000
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$2,230,000
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Liabilities and stockholder's equity
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Current liabilities:
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|
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Accounts payable
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$250,000
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$440,000
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Notes payable
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$400,000
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$400,000
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Accrued expenses
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$70,000
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$50,000
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Total current liabilities
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$720,000
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$890,000
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Long-term liabilities:
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|
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Bonds payable, 2011
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$70,000
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$120,000
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Total liabilities
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$790,000
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$1,010,000
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Stockholders equity:
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|
|
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Preferred stock, $100 par value
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$90,000
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$90,000
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Common stock, $1 par value
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$120,000
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$120,000
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Capital paid in excess of par
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$410,000
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$410,000
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Retained earnings
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$500,000
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$600,000
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Total stockholders equity
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$1,120,000
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$1,220,000
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Total liabilities and stockholders equity
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$1,910,000
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$2,230,000
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Question 1 - What is the net income figure to use as a starting point for the statement of cash flows?
Question 2 - The total adjustments to net income to determine cash flows from operating activities are......(Hint: be sure to add up changes in current assets and current liabilities as noted on the balance sheet going from year 2010 to year 2011) to get the answer.
Question 3 - Net cash flows from operating activities are.....(Hint: don't forget net income)
Question 4 - Cash flows from investing activities are.....
Question 5 - Net Cash flows from investing activities are....
Question 6 - Cash flows from financing activities are....
Question 7 - Net Cash flows from financing activities are....
Question 8 - The net increase/decrease in cash flows is....
Question 9 - Compare your answer in number 8 with the change in the cash account on the balance sheet from 2010 going into 2011. What do you notice?