Question

In: Accounting

12. During 2015 the Magneto Company had a net income of $66,000. In addition, selected accounts...

12. During 2015 the Magneto Company had a net income of $66,000. In addition, selected accounts showed the following information:

Accounts receivable - decrease                                                        $6,000

Accounts payable - decrease                                                                       3,000

Accumulated depreciation - increase                                                        4,500

Gain on sale of long-term investment                                                      9,000

Long-term investments - decrease                                                            25,000              

Equipment - increase                                                                       10,000

No long-term investments were purchased during the year and no equipment was sold during the year. What was the cash flow from operating activities?

What was the amount of cash provided by operating activities?

a. $73,500

b. $58,500

c. $82,500

d. $64,500

13.       Refer to the previous question. What was the cash flow from investing activities?

a. $15,000

b. $24,000

c. $35,000

d. ($15,000)

14.       American Company reported the following information:

Net cash provided by operating activities                                          $120,000

Average current liabilities                                                                   60,000

Average long-term liabilities                                                                       100,000

            Dividends declared and paid                                                                          25,000        

Capital Expenditures                                                                                       65,000          

Payment of debt                                                                                   40,000

What is American’s free cash flow?

a. $(10,000)

b. $120,000

c. $30,000

d. $95,000

15.       Refer to the previous question. What is the cash debt coverage ratio?

a. .75

b. 1.33

c. 1.20

d. .50

16.       Snyder, Inc. purchased equipment for $400,000 which was estimated to have a useful life of 10 years and a salvage value of $20,000. At the beginning of year 5, Snyder changed it’s estimate to a total of 8 years from the date of purchase with a salvage value of $10,000. What is the book value of the equipment at the end of year 5?

a. $188,500

b. $211,500

c. $178,500

d. $248,000

need help with the solutions on these thank you

Solutions

Expert Solution

12

Answer: cash provided by operating activities = $ 64500

Working notes for the above answer is as under

Cash flow statement (partial)

Amount $

Amount $

Cash flow from Operating activity

Net income

66000

Depreciation

4500

Adjustment to reconcile net income

Accounts receivable - decrease    

6000

Accounts payable - decrease   

-3000

Gain on sale of long-term investment  

-9000

Net changes

-1500

Cash flow from Operating activity

64500

__________________________________________________________________

13

Answer: cash flow from investing activities =$24,000

Working notes for the above answer is as under

.Cash flow statement (partial)

Amount $

Amount $

Cash flow from Investing activity

Long-term investments - decrease  (25000+9000)

34000

Equipment - increase                                    

-10,000

Net Cash flow from Investing activity

24,000

___________________________________________________________________________

14

Answer: American’s free cash flow=$30,000

Working notes for the above answer is as under

Particular

Amount $

Amount $

Net cash provided by operating activities

120,000

Less:

Dividends declared and paid

-25000

Capital Expenditures

-65000

-90000

Free cash flow

30,000

_________________________________________________________________________

15

Answer: cash debt coverage ratio=0.75

Working notes for the above answer is as under

Cash debt coverage ratio

=Net cash provided by operating activities/Average liability

=120,000/ (60,000+100,000)

=120,000/160,000

=0.75

___________________________________________________________________

16

Answer: book value of the equipment at the end of year 5=$188,500

Working notes for the above answer is as under

Depreciation per year

=(Cost-Salvage value)/Useful life

=(400,000-20,000)/10

=$38000 per year depreciation

Hence book value after 4 years=$400,000-(38000*4)=$248000

Hence depreciation now=($248000-$10,000)/4

=$59500/year.

book value as on end of year 5=($248000-$59500)=$188500.

ekkarill92 answered 2 years ago
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