Maurice Tutor
$15/per page/Negotiable
p9. Kohl Ceramics, Inc.’s comparative balance sheets, for December 31, 2014 and 2013, follow.
Â
Kohl Ceramics, Inc.
Comparative Balance Sheets
                                           December 31, 2014 and 2013                                            Â
Â
|
 Assets Cash |
2014 Â $ Â 515,200 |
 |
2013 Â $Â Â 611,200 |
|
Accounts receivable (net) |
1,477,600 |
 |
1,517,600 |
|
Inventory |
1,920,000 |
 |
1,600,000 |
|
Prepaid expenses |
29,600 |
 |
53,600 |
|
Long-term investments |
880,000 |
 |
880,000 |
|
Land |
722,400 |
 |
642,400 |
|
Building |
2,400,000 |
 |
1,840,000 |
|
Accumulated depreciation—building |
(480,000) |
 |
(320,000) |
|
Equipment |
960,000 |
 |
960,000 |
|
Accumulated depreciation—equipment |
(232,000) |
 |
(112,000) |
|
Intangible assets |
40,000 |
 |
80,000 |
|
Total assets |
$8,232,800 |
 |
$7,752,800 |
|
Liabilities and Stockholders’ equity |
 |
 |
 |
|
Accounts payable |
$Â Â 941,600 |
 |
$1,321,600 |
|
Notes payable (current) |
80,000 |
 |
320,000 |
|
Accrued liabilities |
21,600 |
 |
41,600 |
|
Mortgage payable |
2,160,000 |
 |
1,600,000 |
|
Bonds payable |
2,000,000 |
 |
1,520,000 |
|
Common stock |
2,600,000 |
 |
2,600,000 |
|
Additional paid-in capital |
160,000 |
 |
160,000 |
|
Retained earnings |
509,600 |
 |
389,600 |
|
Treasury stock |
(240,000) |
 |
(200,000) |
|
Total liabilities and stockholders’ equity |
$8,232,800 |
 |
$7,752,800 |
Â
During 2014, the company had net income of $192,000 and building and equip- ment depreciation expenses of $160,000 and $120,000, respectively. It amortized intangible assets in the amount of $40,000; purchased investments for $232,000; sold investments for $300,000, on which it recorded a gain of $68,000; issued $480,000 of long-term bonds at face value; purchased land and a warehouse through a $640,000 mortgage; paid $80,000 to reduce the mortgage; borrowed $120,000 by  issuing notes payable; repaid notes payable in the amount of $360,000; declared and paid cash dividends in the amount of $72,000; and purchased treasury stock in the amount  of
$40,000.
reQUIreD
1.   Using the indirect method, prepare a statement of cash flows for Kohl Ceramics.
2.   aCCounting ConneCtion ▶ Why did Kohl Ceramics experience a decrease in cash in a year in which it had a net income of $192,000? Discuss and interpret.
3.   Business appliCation ▶ Compute and assess cash flow yield and free cash flow for 2014. Why is each of these measures important in assessing cash-generating ability?