Cash Flow from Operating Activities (Indirect Method)
The following information was obtained from Galena Company’s comparative balance sheets:
| End of Year | Beginning of Year | |
|---|---|---|
| Cash | $61,560 | $29,160 |
| Accounts receivable | 142,560 | 113,400 |
| Inventory | 178,200 | 158,760 |
| Prepaid rent | 19,440 | 25,920 |
| Long-term investments | 68,040 | 110,160 |
| Plant assets | 486,000 | 343,440 |
| Accumulated depreciation | (129,600) | (120,600) |
| Accounts payable | 77,760 | 64,800 |
| Income tax payable | 12,960 | 19,440 |
| Common stock | 392,040 | 298,800 |
| Retained earnings | 343,440 | 294,800 |
| Capital expenditures | 30,000 |
Assume that Galena Company’s income statement showed depreciation expense of $9,000, a gain on sale of investments of $10,000, and a net income of $90,000. (a) Calculate the cash flow from operating activities using the indirect method and (b) compute Galena’s operating-cash-flow-to-capital-expenditures ratio.
a. Use negative signs with cash outflow answers.
| Cash Flow from Operating Activities | |||
|---|---|---|---|
| Net Income | $ | ||
| Add (deduct) items to convert net income to cash basis | |||
| Depreciation | |||
| Gain on sale of investments | |||
| Accounts Receivable | |||
| Inventory | |||
| Prepaid Rent | |||
| Accounts Payable | |||
| Income Tax Payable | |||
| Cash Provided by Operating Activities | $ | ||
b. Operating-cash-flow-to-capital-expenditures ratio (Round answer to two decimal points)
