Question

Megan Corporation's net income last year was $115,000. Changes in the company's balance sheet accounts for the year appear below:

Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash $(16,600)
Accounts receivable $(31,000)
Inventory $11,500
Prepaid expenses $(18,900)
Long-term investments $97,000
Property, plant and equipment $89,000
Accumulated depreciation $92,000
Liability and Equity Accounts:
Accounts payable $0
Accrued liabilities $22,900
Income taxes payable $(13,800)
Bonds payable $(55,500)
Common stock $37,000
Retained earnings $48,400

The company paid a cash dividend of $66,600 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.

The free cash flow for the year was:

a. $165,500

b. $98,900

c. $187,900

d. $365,300

Answer 1

Fre cash flow for the firm 165,500

Step-by-step explanation:

operating activities

net income 115,000

non-monetary:

depreciation 92,000

change in working capital

decrease in AR 31,000

increase in inventory (11,500)

decrease in prepaid 18,900

increase in accrued liabilies 22,900

decrease income tax payable (13,800)

generated from operating activities: 254,500

Capital Expenditures: (89,000)

Fre cash flow for the firm 165,500

Answer 2

The answer to this question is option (a) $165,500

Step-by-step explanation:

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