Question

Consider the following abbreviated financial statements for Weston Enterprises: WESTON ENTERPRISES 2018 and 2019 Partial Balance Sheets Assets Liabilities and Owners’ Equity 2018 2019 2018 2019 Current assets $ 1,218 $ 1,323 Current liabilities $ 496 $ 553 Net fixed assets 4,987 6,010 Long-term debt 2,650 2,819 WESTON ENTERPRISES 2019 Income Statement Sales $ 15,394 Costs 7,153 Depreciation 1,375 Interest paid 396 a. What is owners' equity for 2018 and 2019? (Do not round intermediate calculations.) b. What is the change in net working capital for 2019? (Do not round intermediate calculations.) c-1. In 2019, Weston Enterprises purchased $2,520 in new fixed assets. How much in fixed assets did the company sell? (Do not round intermediate calculations.) c-2. In 2019, Weston Enterprises purchased $2,520 in new fixed assets. What is the cash flow from assets for the year? The tax rate is 22 percent. (Do not round intermediate calculations.) d-1. During 2019, Weston Enterprises raised $514 in new long-term debt. How much long-term debt must Weston Enterprises have paid off during the year? (Do not round intermediate calculations.) d-2. During 2019, Weston Enterprises raised $514 in new long-term debt. What is the cash flow to creditors? (Do not round intermediate calculations.)

Answer 1

Assets			Liabilities and Owners Equity
	2018	2019		2018	2019
Current Assets	1,218	1,323	Current Liabilities	496	553
Net Fixed Assets	4,987	6,010	Long-term Debt	2,650	2,819
			Total Liabilities	3,146	3,372
			Owner's Equity	3,059	3,961
Total Assets	6,205	7,333		6,205	7,333

a.

	2018	2019
Owners Equity	$ 3,059	$ 3,961

b. Change in Net Working Capital : + $ 48

	2018	2019
Current Assets	$ 1,218	$ 1,323
Less: Current Liabilities	496	553
Net Working Capital	722	770
Change in Net Working Capital	-	$ 48

c.- 1: The company sold $ 122 in fixed assets during 2019.

Ending net fixed assets	6,010
Add: Depreciation expense	1,375
Net	7,385
Less: Purchases	2,520
Less: Beginning net fixed assets	4,987
Fixed assets sold during 2019	( 122 )

c-2.

Income Statement
Sales	$ 15,394
Costs	7,153
Depreciation	1,375
EBIT	6,866
Interest paid	396
Income before Taxes	6,470
Taxes @ 22 %	1,423
Net Income	$ 5,047

Cash flow from assets = OCF - Change in NWC - Net Capital Spending

OCF = EBIT + Depreciation - Tax = $ ( 6,866 + 1,375 - 1,423 ) = $ 6,818

Change in NWC : $ 48

Net Capital Spending = $ 2,520 - $ 122 = $ 2,398

Cash flow from assets = $ 6,818 - $ 48 - $ 2,398 = $ 4,372

d-1. Long Term Debt paid off during 2019 = $ 2,650 + $ 514 - $ 2,819 = $ 345.

d-2: Cash flow to creditors = Interest paid - Net New Long Term Debt = $ 396 - $ ( 514 - 345 ) = $ 227