Dragonfly Limited (Dragonfly), a diversified electronics firm headquartered in Singapore, reported the following income statement information for its year ended December 31, Year 7. Dragonfly applies Singapore financial reporting standards and reports its results in thousands of Singapore dollars ($). In answering this problem, assume Dragonfly uses either U.S. GAAP or IFRS; for purposes of this problem, this choice will not matter.$

$$\begin{array}{lr} &{\text { Year } 7} \\ \hline \text{Sales}&\$ 460,830 \\ \text{Cost of Sales}&(416,378) \\ \hline\text{Gross Profit}& 44,452 \\ \text{Other Income }&1,558 \\ \text{Selling and Marketing Costs}&(20,714) \\ \text{General and Administrative Costs}&(20,254) \\ \text{Development Costs}&(1,232) \\ \text{Finance Costs, net}&(6,692) \\ \text{Gain on Sale of Land}&6,546 \\ \text{Share in Results of Associated Companies}&(2) \\ \hline \text{Profit Before Tax}&3,662 \\ \text{Taxation}&(1,094) \\ \hline \text{Profit (Loss)}& \$2,568 \\ \hline \hline \text{Portion of Profit Owned by Minority Interests}&(567) \\ \text{Portion of Profit Owned by Shareholders}&3,135 \\ \hline \end{array}$$

$Assume that Dragonfly supplied additional information about the following six hypothetical transactions or events that happened during Year 7, with all monetary amounts reported in thousands of Singapore dollars.

For each transaction, determine whether revenues and expenses for Year 7 are over- or understated.

e. In December Year 7, Dragonfly recognized interest income on investments in marketable securities of$230. The firm included this income in sales revenues.

Distinguish between the noncontrolling, or minority, interest in net income of a consolidated subsidiary and the noncontrolling, or minority, interest in net assets of a consolidated subsidiary

Describe the key steps in the flow to equity method for valuing a levered investment.

What is the difference between operating cash flow and free cash flow?

How to calculate free cash flow from the cash flow statement?

What is "free cash flow"? Can a company have a negative free cash flow and still be considered successful?

How to calculate free cash flow from a cash flow statement?

What is free cash flow, and how is it computed?

What do financial managers mean by “free cash flow”? How is free cash flow calculated? Briefly explain.

How do we calculate the firm's free cash flow, and the free cash flow to equity?

How does the risk and cost of capital of levered equity compare to that of unlevered equity? Which is the superior capital structure choice in a perfect capital market?

Dragonfly Limited (Dragonfly), a diversified electronics firm headquartered in Singapore, reported the following income statement information for its year ended December 31, Year 7. Dragonfly applies Singapore financial reporting standards and reports its results in thousands of Singapore dollars ($). In answering this problem, assume Dragonfly uses either U.S. GAAP or IFRS; for purposes of this problem, this choice will not matter.$

$$\begin{array}{lr} &{\text { Year } 7} \\ \hline \text{Sales}&\$ 460,830 \\ \text{Cost of Sales}&(416,378) \\ \hline\text{Gross Profit}& 44,452 \\ \text{Other Income }&1,558 \\ \text{Selling and Marketing Costs}&(20,714) \\ \text{General and Administrative Costs}&(20,254) \\ \text{Development Costs}&(1,232) \\ \text{Finance Costs, net}&(6,692) \\ \text{Gain on Sale of Land}&6,546 \\ \text{Share in Results of Associated Companies}&(2) \\ \hline \text{Profit Before Tax}&3,662 \\ \text{Taxation}&(1,094) \\ \hline \text{Profit (Loss)}& \$2,568 \\ \hline \hline \text{Portion of Profit Owned by Minority Interests}&(567) \\ \text{Portion of Profit Owned by Shareholders}&3,135 \\ \hline \end{array}$$

$Assume that Dragonfly supplied additional information about the following six hypothetical transactions or events that happened during Year 7, with all monetary amounts reported in thousands of Singapore dollars.

For each transaction, determine whether revenues and expenses for Year 7 are over- or understated.

d. During Year 7, the firm incurred$1,232 in development costs associated with a new product that the firm had developed; the firm expensed these costs. The product design and manufacture is nearly complete. The firm’s auditor has decided that Dragonfly should have capitalized the development costs.

Dragonfly Limited (Dragonfly), a diversified electronics firm headquartered in Singapore, reported the following income statement information for its year ended December 31, Year 7. Dragonfly applies Singapore financial reporting standards and reports its results in thousands of Singapore dollars ($). In answering this problem, assume Dragonfly uses either U.S. GAAP or IFRS; for purposes of this problem, this choice will not matter.$

$$\begin{array}{lr} &{\text { Year } 7} \\ \hline \text{Sales}&\$ 460,830 \\ \text{Cost of Sales}&(416,378) \\ \hline\text{Gross Profit}& 44,452 \\ \text{Other Income }&1,558 \\ \text{Selling and Marketing Costs}&(20,714) \\ \text{General and Administrative Costs}&(20,254) \\ \text{Development Costs}&(1,232) \\ \text{Finance Costs, net}&(6,692) \\ \text{Gain on Sale of Land}&6,546 \\ \text{Share in Results of Associated Companies}&(2) \\ \hline \text{Profit Before Tax}&3,662 \\ \text{Taxation}&(1,094) \\ \hline \text{Profit (Loss)}& \$2,568 \\ \hline \hline \text{Portion of Profit Owned by Minority Interests}&(567) \\ \text{Portion of Profit Owned by Shareholders}&3,135 \\ \hline \end{array}$$

$Assume that Dragonfly supplied additional information about the following six hypothetical transactions or events that happened during Year 7, with all monetary amounts reported in thousands of Singapore dollars.

For each transaction, determine whether revenues and expenses for Year 7 are over- or understated.

c. On June 4, Year 7, Dragonfly sold some land it had purchased many years earlier, prior to the boom in the real estate market. The carrying value of the land on the firm’s books was$454, and Dragonfly sold it for $7,000. Dragonfly recorded a gain on the sale of the land of$6,546.

Dragonfly Limited (Dragonfly), a diversified electronics firm headquartered in Singapore, reported the following income statement information for its year ended December 31, Year 7. Dragonfly applies Singapore financial reporting standards and reports its results in thousands of Singapore dollars ($). In answering this problem, assume Dragonfly uses either U.S. GAAP or IFRS; for purposes of this problem, this choice will not matter.$

$$\begin{array}{lr} &{\text { Year } 7} \\ \hline \text{Sales}&\$ 460,830 \\ \text{Cost of Sales}&(416,378) \\ \hline\text{Gross Profit}& 44,452 \\ \text{Other Income }&1,558 \\ \text{Selling and Marketing Costs}&(20,714) \\ \text{General and Administrative Costs}&(20,254) \\ \text{Development Costs}&(1,232) \\ \text{Finance Costs, net}&(6,692) \\ \text{Gain on Sale of Land}&6,546 \\ \text{Share in Results of Associated Companies}&(2) \\ \hline \text{Profit Before Tax}&3,662 \\ \text{Taxation}&(1,094) \\ \hline \text{Profit (Loss)}& \$2,568 \\ \hline \hline \text{Portion of Profit Owned by Minority Interests}&(567) \\ \text{Portion of Profit Owned by Shareholders}&3,135 \\ \hline \end{array}$$

$Assume that Dragonfly supplied additional information about the following six hypothetical transactions or events that happened during Year 7, with all monetary amounts reported in thousands of Singapore dollars.

For each transaction, determine whether revenues and expenses for Year 7 are over- or understated.

b. On February 2, Year 7, the firm agreed to supply a customer with$25,000 of high-end electronics products. On this date, Dragonfly recognized revenues of $25,000 and cost of sales of$18,000 reflecting the carrying value of the high-end inventory. Dragonfly delivered on the agreement in September Year 7.