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Home / Questions / EXERCISE 14 3 Calculating Free Cash Flow LO3 Paisley Company prepared the following statem...

# EXERCISE 14 3 Calculating Free Cash Flow LO3 Paisley Company prepared the following statement of cash flows for the current year Operating activities Net income

EXERCISE 14–3 Calculating Free Cash Flow [LO3]

Paisley Company prepared the following statement of cash flows for the current year:

 Operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$   40,000 Adjustments to convert net income to cash basis: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$ 22,000 Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (50,000) Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,000) Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 Decrease in accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,000) Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 (4,000) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 36,000 Investing activities: Proceeds from the sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . 24,000 Loan to Allen Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,000) Additions to plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (120,000) Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . (126,000) Financing activities: Increase in bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 Increase in common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000) Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . 110,000 Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000) Cash balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 Cash balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$   47,000

Required:

Compute Paisley Company’s free cash flow for the current year.

Jun 28 2020 View more View Less