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3) Thomson Co. had $150,000 and $310,000 in cash on the balance sheet at the end...

  1. 3) Thomson Co. had $150,000 and $310,000 in cash on the balance sheet at the end of 2XX0 and 2XX1, respectively. Its cash flow from operating activities totaled $2.5mi and its cash flow from long-term investment activities totaled $2mi. The firm issued $500,000 in L-T debt and paid $50,000 dividends. How much common stock did the firm repurchase?

  2. 4) During 2XX1, Western Corp issued $3mi in common stocks and purchased $5mi fixed assets. Its cash flow from operating activities totaled $6mi. Its notes payable decreased by $1mi. The firm had $500,000 cash on its balance sheet at the end of 2XX0. Calculate the amount of cash at the end of 2XX1.

Solutions

Expert Solution

(3) Given: Cash flows from operating activities = $2.5m. Cash flows from investing activities = $2m, Beginning cash balance = $150000 = $0.15m, Ending cash balance = $310000 = $0.31m

First we will calculate cash flows from financing activities as per below:

Cash flows from financing activities= Cash from LT Debt issue - Cash paid for dividends + Cash from common stock

Putting the values in the above equation, we get,

Cash flows from financing activities = $500000 - $50000 + Common stock

Cash flows from financing activities = $450000 + Common stock = $0.45m + Common stock

Now, as per the cash flow statement;

Cash flows from operating activities + Cash flows from investing activities + Cash flows from financing activities + Beginning cash balance = Ending cash balance

Putting the values in the above equation, we get,

$2.5 + $2 + $0.45 + Common stock issue + $0.15 = $0.31

$5.1 + Common stock = $0.31

Common stock = $0.31 - $5.1

Common stock = - $4.79

Since the value of common stock is negative, it means that the cash is paid for common stock repurchase or treasury stock.

Total repurchase of common stock = $4.79 m or $4790000

(4) Given: Cash flows from operating activities = $6m. Cash flows from investing activities = Purchase of fixed assets = -$5m, Beginning cash balance = $500000 = $0.5m,

First we will calculate cash flows from financing activities as per below:

Cash flows from financing activities= Cash from common stock issue - Cash paid for notes payable

Putting the values in the above equation, we get,

Cash flows from financing activities = $3m - $1m

Cash flows from financing activities = $2m

Now, as per the cash flow statement;

Cash flows from operating activities + Cash flows from investing activities + Cash flows from financing activities + Beginning cash balance = Ending cash balance

Putting the values in the above equation, we get,

$6 + (-$5) + $2 + $0.5 = Ending cash balance

$3.5 = Ending cash balance

So, cash at the end of 2XX1 is $3.5m or 3500000.

jeff jeffy answered 3 months ago
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