P5-7 Aero Inc.
had the following balance sheet at December 31, 2013
P5-7 (Preparation
of a Statement of Cash Flows and Balance Sheet)
Aero Inc. had
the following balance sheet at December 31, 2013.
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During 2014, the
following occurred.
1. Aero
liquidated its available-for-sale investment portfolio at a loss of $5,000.
2. A tract of
land was purchased for $38,000.
3. An additional
$30,000 in common stock was issued at par.
4. Dividends
totaling $10,000 were declared and paid to stockholders.
5. Net income
for 2014 was $35,000, including $12,000 in depreciation expense.
6. Land was
purchased through the issuance of $30,000 in additional bonds.
7. At December
31, 2014, Cash was $70,200, Accounts Receivable was $42,000, and Accounts
Payable was $40,000.
Instructions
a Prepare a
statement of cash flows for the year 2014 for Aero.
b. Prepare the
unclassified balance sheet as it would appear at December 31, 2014.
c. Compute
Aero's free cash flow and current cash debt coverage for 2014.
d. Use the
analysis of Aero to illustrate how information in the balance sheet and
statement of cash flows helps the user of the financial statements.
TUTORIAL PREVIEW
(a)
AERO INC.
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Statement of Cash Flows
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For the Year Ended December 31, 2014
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Cash flows from operating activities
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Net income
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$35,000
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Adjustments to reconcile net income to
net cash provided by operating activities
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Depreciation expense
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$12,000
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