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Lomex Company
Comparative Balance Sheet as on December 31, 2009 and 2008
2009
2008
Assets
Current Assets:
$ 42,000
$
27,000
Cash
19,000
13,000
Marketable Securities
710,000
530,000
Accounts Receivable
848,000
860,000
Inventory
10,000
5,000
Prepaid Expenses
1,629,000
1,435,000
Total Current Assets
60,000
110,000
Long-term Investments
130,000
80,000
Loans to Subsidiaries
3,170,000
2,600,000
Plant and Equipment
810,000
755,000
Less Accumulated Depreciation
2,360,000
1,845,000
Net Plant and Equipment
84,000
90,000
Patents
$ 4,263,000
$ 3,560,000
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities:
$ 970,000
$ 670,000
Accounts Payable
65,000
82,000
Accrued Liabilities
1,035,000
752,000
Total Current Liabilities
820,000
600,000
Long-Term Notes
95,000
80,000
Deferred Income Taxes
1,950,000
1,432,000
Total Liabilities
Stockholders' Equity:
1,740,000
1,650,000
Common Stock
573,000
478,000
Retained Earnings
2,313,000
2,128,000
Total Stockholder' Equity
$ 4,263,000
$ 3,560,000
Total Liabilities and Stockholders' Equity
The following additional information is available about the companys activities during 2009:
a) Cash dividends declared and paid to the common stockholders totalled $75,000.
b) Long-term notes with a value of $380,000 were repaid during the year.
c) Equipment was sold during the year for $70,000. The equipment had cost $130,000 and had $40,000 in
accumulated depreciation on the date of sale.
d) Long-term investments were sold during the year for $110,000. These investments had cost $50,000
when purchased several years ago.
e) The companys income statement for 2009 follows:
Sales
$ 2,000,000
Cost of goods sold
1,300,000
Gross Margin
700,000
Selling and administrative expenses
490,000
Net Operating Income
210,000
Non-Operating Items:
Gain on sale on investments $ 60,000
Loss on sale of equipment
20,000
40,000
Income before taxes
250,000
Income Taxes
80,000
Net Income
$ 170,000
Required:
a) Using the indirect method, prepare a statement of cash flows for the year 2009.
b) Compute free cash flow for 2009.