E5-18B (Preparation of a Statement of Cash Flows Analysis) A comparative balance sheet for Harrison Corporation is presented below.

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E5-18B (Preparation of a Statement of Cash Flows Analysis) A comparative balance sheet for Harrison Corporation is presented below.

                                                           HARRISON CORPORATION

                                                                 BALANCE SHEETS

                                                                  December 31          

Assets                                           2014                          2013                       Inc/Dec.

Cash                                           $ 36,500                  $ 11,000                 $ 25,500 Inc.

Accounts receivable                    41,000                      33,000                      8,000 Inc.

Inventory                                        90,000                      94,500                       4,500 Dec.

Building                                       130,000                     100,000                   30,000 Inc.

Accumulated deprec building (34,500)                     (21,000)                   13,500 Inc.

Land                                             35,500                         55,000                    19,500 Dec.

    Total                                      $ 298,500                $ 272,500

Liabilities and Stockholders’ Equity

Accounts payable                        $ 17,000                  $ 23,500                     6,500 Dec.

Bonds payable                                75,000                   100,000                    25,000 Dec.

Common stock ($1 par)              107,000                     82,000                    25,000 Inc.

Retained earnings                         99,500                      67,000                     32,500 Inc.

Total                                             $ 298,500                 $272,500

Additional information:

Cash dividends of $30,000 were declared and paid.

Bonds payable of $25,000 were converted to common stock.

Instructions

(a) Prepare a statement of cash flows for 2014.

(b) Compute the current ratio (current assets  current liabilities) as of December 31, 2013 and 2014 and compute free cash flow for the year 2014.

(c) In light of the analysis in (b), comment on Harrison’s liquidity and financial flexibility.

    • 10 years ago
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