chicago corporation issued the following statement of cash flows for 2012 337694

1. Chicago Corporation issued the following statement of cash flows for 2012.

Cash flows from operating activities

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Net income

$19,000

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation expense

$ 8,100

Loss on disposal of plant assets

1,300

Decrease in accounts receivable

6,900

Increase in inventory

(4,000)

Decrease in accounts payable

(2,000)

10,300

Net cash provided by operating activities

29,300

Cash flows from investing activities

Sale of investments

1,100

Purchase of equipment

(19,000)

Net cash used by investing activities

(17,900)

Cash flows from financing activities

Issuance of stock

10,000

Payment on long term note payable

(5,000)

Payment for dividends

(9,000)

Net cash used by financing activities

(4,000)

Net increase in cash

7,400

Cash at beginning of year

10,000

Cash at end of year

$ 17,400

(a) Compute free cash flow for Chicago Corporation. (b) Explain why free cash flow

often provides better information than “Net cash provided by operating activities.”

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