Expert Answer :Accounting 301 Spring 2015 Cash flows case – Dubai

Solved by verified expert :Cash flows case: (indirect method).The net changes in the balance sheet accounts of Dubai, Inc. for the year 2015 are shown below:Account DebitCreditCash $ 95,600Accounts receivable $ 64,000Allowance for doubtful accounts 10,000Inventory 197,200Prepaid expenses 20,000Long-term investments 144,000Land 400,000Buildings 650,000Machinery 100,000Equipment 28,000Accumulated depreciation:Buildings 24,000Machinery 20,000Equipment 12,000Accounts payable 183,200Accrued liabilities 72,000Dividends payable 128,000Premium on bonds 36,000Bonds payable 900,000Preferred stock ($50 par) 60,000Common stock ($10 par) 156,000Additional paid-in capital—common 223,200Retained earnings 87,200$1,805,200 $1,805,200Additional information:1. Income Statement Data for Year Ended December 31, 2015Income before extraordinary item $272,000Extraordinary loss: Condemnation of land 132,000Net income $140,0002. Cash dividends of $128,000 were declared December 15, 2015, payable January 15, 2016. A 5% stock dividend was issued March 31, 2015, when the market value was $22.00 per share.3. The long-term investments were sold for $140,000.4. A building and land which cost $480,000 and had a book value of $350,000 were sold for $400,000. The cost of the land, included in the cost and book value above, was $20,000.5. The following entry was made to record an exchange of an old machine for a new one:Machinery …………………………………………………………… 160,000Accumulated Depreciation—Machinery…………………….. 40,000……………………………………………………………. Machinery 60,000……………………………………………………………………. Cash 140,0006. A fully depreciated copier machine which cost $28,000 was written off.7. Preferred stock of $60,000 par value was redeemed for $80,000.8. The company sold 12,000 shares of its common stock ($10 par) on June 15, 2015 for $25 a share. There were 87,600 shares outstanding on December 31, 2015.9. Bonds were sold at 104 on December 31, 2015.10. Land that was condemned had a book value of $240,000.11. Beginning Cash balance was $0Instructions1. Prepare a statement of cash flows (indirect method). Ignore tax effects.2. What is the free cash3. What are the advantages of using the statement of cash flows for businesses