Megan Corporation's net income last year was $98,000. Changes in the company's balance sheet accounts for the year appear below:
The company paid a cash dividend of $36,000 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.
-The free cash flow for the year was:
A) $123,000
B) $87,000
C) $142,000
D) $269,000

Question

Megan Corporation's net income last year was $98,000. Changes in the company's balance sheet accounts for the year appear below:
  The company paid a cash dividend of $36,000 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.
-The free cash flow for the year was:
A) $123,000 
B) $87,000 
C) $142,000 
D) $269,000

Quizplus · Accepted Answer

Operating activities:
 11ea7761_15a0_6ee9_81a5_13970e97657e_TB2580_00 Free cash flow = Net cash provided by operating activities − Capital expenditures − Dividends
= $178,000 − $55,000 − $36,000 = $87,000

Megan Corporation's Net Income Last Year Was $98,000