2014 2013 Increase/decreaseAccounts Payable 6,0009,000 (3,000)AccruedLiabilities3,0001,5001,500LongTermNotesPayable126,000135,000(9,000)Totalliabilities135,000 145,500(10,500)Additional information provided by the company includes the following:During 2014, the company repaid 60,000ofLongTermNotesPayable.During2014,thecompanyborrowed51,000 on a new Long-Term Note Payable.With the help of T-account format, analyze the transactions affecting the Long-Term Notes Payable account.
  • Answer: Net Cash from operating activities 25,000Less:CashusedinLongTermAssets0Less:Cashdividends10,000FreeCashFlow15,000
  • Answer: TRUEExplanation: Retained EarningsBeginning Balance 82,000Add:NetIncomefortheyear58,000=140,000Less: Retained Earnings for 2015 (108,000)Dividend Declared =$32,000
  • Answer: FALSE
  • Long Term Notes Payable______________________________________Dr CrRepay60,000 l 135,000 Beg l 51,000Borrowing ________________l__________________ l 126,000 Ending
Refer to the following information of Harris Inc. and calculate the free cash flow of Harris Inc.Net Cash from operating activities, 25,000NetCashfromfinancingactivities,35,000Net Cash used in investing activities, apart from investment in Long-Term Assets, 12,000.NetCashusedininvestingactivities,(20,000)Investment in Long-Term Assets, 12,000Cashdividendpaid10,000.
  • Long Term Notes Payable______________________________________Dr CrRepay60,000 l 135,000 Beg l 51,000Borrowing ________________l__________________ l 126,000 Ending
  • Answer: TRUEExplanation: Retained EarningsBeginning Balance 82,000Add:NetIncomefortheyear58,000=140,000Less: Retained Earnings for 2015 (108,000)Dividend Declared =$32,000
  • It includes cash transactions affecting the long-term liabilities and equity of the business.
  • Answer: Net Cash from operating activities 25,000Less:CashusedinLongTermAssets0Less:Cashdividends10,000FreeCashFlow15,000
What is the equation to calculate Free Cash Flow
  • It shows the link between accrual based income and the cash reported on the balance sheet.
  • It includes cash transactions that primarily affect current assets and current liabilities.
  • It includes cash transactions affecting the long-term liabilities and equity of the business.
  • Free Cash Flow= Net Cash Provided by Operating Activities - Capital Expenditures- Cash Dividends
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