Statement of Cash Flows: Indirect Method
Flanders Corporation’s income statement for the year ended June 30, 20×7 and its comparative balance sheets as of June 30, 20×7 and 20×6 appear on the opposite page. During 20×7, the corporation sold equipment that cost $48,000, on which it had accumulated depreciation of $34,000, at a loss of $8,000. It also purchased land and a building for $200,000 through an increase of $200,000 in Mortgage Payable; made a $40,000 payment on the mortgage; repaid notes but borrowed an additional $60,000 through the issuance of a new note payable; and declared and paid a $120,000 cash dividend.
Required
1. Using the indirect method, prepare a statement of cash flows. Include a supporting schedule of noncash investing and financing transactions.
2. User Insight: What are the primary reasons for Flanders Corporation’s large increase in cash from 20×6 to 20×7?
3. User Insight: Compute and assess cash flow yield and free cash flow for 20×7. How would you assess the corporation’s cash-generating ability?
